Daktronics, Inc.
DAKTRONICS INC /SD/ (Form: DEF 14A, Received: 06/29/2011 16:45:59)


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
Filed by the Registrant
[X]
 
Filed by a Party other than the Registrant
[   ]
 

Check the appropriate box:

[   ]
Preliminary Proxy Statement
[   ]
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X]
Definitive Proxy Statement
[   ]
Definitive Additional Materials
[   ]
Soliciting Material Pursuant to §240.14a-12

Daktronics, Inc.
(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):

[X]
No fee required.
[   ]
Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
 
1)
Title of each class of securities to which transaction applies:
 
2)
Aggregate number of securities to which transaction applies:
 
3)
Per unit price or other underlying value of transaction computer pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
4)
Proposed maximum aggregate value of transaction:
 
5)
Total fee paid:
[   ]
Fee paid previously with preliminary materials.
[   ]
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
1)
Amount previously paid:
 
2)
Form, Schedule or Registration Statement No.:
 
3)
Filing Party:
 
4)
Date Filed:

 
 

 

DAKTRONICS, INC.
201 Daktronics Drive
Brookings, South Dakota 57006

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
 TO BE HELD ON WEDNESDAY, AUGUST 24, 2011


NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the “Annual Meeting”) of Daktronics, Inc. (the “Company”) will be held at the Company’s headquarters, 201 Daktronics Drive, Brookings, South Dakota 57006 on Wednesday, August 24, 2011, at 7:00 p.m. Central Daylight Time, for the following purposes:

1.  
To elect three Directors to serve for a three-year term that expires on the date of the Annual Meeting of Shareholders in 2014 or until their successors are duly elected;

2.  
To have an advisory vote on the compensation of our named executive officers (a non-binding “say-on-pay” vote);

3.  
To have an advisory vote on how frequently shareholders should vote on compensation of our named executive officers (a non-binding “say-on-frequency” vote);
 
4.  
To ratify the appointment by the Audit Committee of the Board of Directors of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2012; and

5.  
To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only the shareholders of record of our common stock at the close of business on June 27, 2011 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting.  If an insufficient number of votes is present for a quorum or is cast to approve or ratify any of the foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned or postponed to allow further solicitation of proxies by the Company.

All shareholders are invited to attend the Annual Meeting in person. However, to ensure your representation at the Annual Meeting, you are urged to vote as soon as possible.  Shareholders may vote their shares over the Internet or via a toll-free telephone number.  If shareholders have received a paper copy of a proxy card by mail, they may vote by completing, signing, dating and returning the proxy card as promptly as possible in the postage-prepaid envelope provided for that purpose. Any shareholder attending the Annual Meeting has the right to revoke that shareholder’s proxy card and vote in person even if he or she has previously returned a proxy.  For specific information on how to vote shares, please refer to the section heading “How Votes are Submitted” and “Revocability of Proxies”.

 
By Order of the Board of Directors,
   
   
 
Carla S. Gatzke
 
Corporate Secretary
   
Brookings, South Dakota
 
July 11, 2011
 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE BY PHONE OR BY INTERNET, OR IF YOU HAVE RECEIVED A PAPER COPY OF THE PROXY CARD, BY SIGNING, DATING AND RETURNING THE PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE DAKTRONICS, INC. ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 24, 2011:

This notice, the accompanying proxy statement and our fiscal 2011 Annual Report to Shareholders, which includes our Annual Report on Form 10-K for the year ended April 30, 2011, are available at our website at http://www.daktronics.com . Additionally, and in accordance with the rules of the Securities and Exchange Commission, shareholders may access these materials at the cookies-free website indicated in the Notice of Internet Availability of Proxy Materials that you receive in connection with this notice and the accompanying proxy statement.

 
 

 

Daktronics, Inc.
Table of Contents




   
Pages
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 

 

 
 

 

DAKTRONICS, INC.

PROXY STATEMENT
FOR 2011 ANNUAL MEETING OF SHAREHOLDERS

P ROCEDURAL MATTERS

General
The enclosed proxy is solicited by and on behalf of the Board of Directors of Daktronics, Inc., a South Dakota corporation (the “Company”), for use at our Annual Meeting of Shareholders to be held on Wednesday, August 24, 2011 at Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota at 7:00 p.m. Central Daylight Time, and at any adjournment or postponement thereof (the “Annual Meeting”), for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Shareholders.  This Proxy Statement and the accompanying form of proxy, together with our fiscal year 2011 Annual Report to Shareholders, are being made available to shareholders on the Internet or are being mailed on or about July 11, 2011 to all shareholders entitled to vote at the Annual Meeting.

In this Proxy Statement, “Daktronics”, “Company”, “registrant”, “we”, “us” and “our” refer to Daktronics, Inc.

Shareholders Entitled to Vote; Record Date
Only shareholders of record at the close of business on June 27, 2011 (the “Record Date”) are entitled to notice of and to vote at the meeting.  As of the Record Date, there were 41,707,633 shares of our common stock outstanding and entitled to vote held by 878 shareholders of record.

Notice of Internet Availability of Proxy Materials
We are making proxy materials for the Annual Meeting available over the Internet. Therefore, we are mailing to the majority of our shareholders a notice about the Internet availability of the proxy materials instead of a paper copy of the proxy materials.  The notice is entitled “Notice of Internet Availability of Proxy Materials.”  All shareholders receiving the notice will have the ability to access the proxy materials over the Internet and request to receive a paper copy of the proxy materials by mail.  Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found on the notice.  Our proxy materials may also be accessed on our website at http://www.daktronics.com by selecting “Investors” and then “Proxy Materials.”  We are providing some of our shareholders, including shareholders who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of a notice about the Internet availability of the proxy materials.
 
Voting at the Annual Meeting; Vote Requirements
The holders of a majority of the shares of common stock issued and outstanding and entitled to vote at the Annual Meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business.  If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is present.  Abstentions and broker non-votes will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum.  Each share is entitled to one vote on all matters submitted to a vote.  However, with respect to the election of Directors, every shareholder shall have the right to cast a number of votes equal to the number of Directors to be elected at the Annual Meeting multiplied by the number of shares the shareholder is entitled to vote.  Shareholders may cast all votes for one nominee or divide the votes as they choose among two or three nominees.  Shares abstaining will be treated as not voted.

A plurality of the votes cast is required for the election of Directors.  This means that the Director nominee with the most votes for a particular slot is elected for that slot.  Only votes “for” or “withheld” affect the outcome.  Abstentions are not counted for purposes of the election of Directors.  The affirmative vote of a majority of the shares of common stock represented at the Annual Meeting, either in person or by proxy, assuming a quorum is present, is required to approve any of the other proposals, except that with regard to the advisory vote on how frequently our shareholders should vote on the compensation of our named executive officers, the number of years (one, two or three) that receives the highest number of votes will be deemed to be preferred by our shareholders.  If an executed proxy is returned and the shareholder has abstained from voting on any matter, the shares represented by such proxy will be considered present at the Annual Meeting for purposes of determining a quorum and for purposes of calculating the vote, but they will not be considered to have been voted in favor of such matter. If a signed proxy is returned by a broker holding shares in “street name,” and it indicates that the broker does not have discretionary authority to vote certain shares on one or more matters, such shares will be considered present at the Annual Meeting for purposes of determining a quorum but will not be considered to be represented at the Annual Meeting for purposes of calculating the vote with respect to such matter.
 
1


Counting Votes
The inspector of election appointed for the meeting will count the votes cast by proxy or in person at the Annual Meeting.

Brokers who hold shares in street name for customers will not be able to vote the shares without instructions from their customers with respect to any of the proposals, other than the proposal to ratify the selection of our auditors (Proposal Four of this Proxy Statement). Shares for which brokers have not received instructions, and which therefore are not voted, with respect to a particular proposal are referred to as “broker non-votes” with respect to that proposal. Abstentions from voting on a proposal described in this proxy statement and broker non-votes will not affect the outcome of the vote on that proposal.

How Votes are Submitted
If the shares of our common stock are held directly in the name of the shareholder, he or she can vote on matters to come before the meeting as follows:

If the shareholder has received a paper copy of a proxy card, by completing, dating and signing the proxy card and returning it to us in the postage-paid envelope provided for that purpose; or
By written ballot at the meeting; or
By telephone, by calling 1-800-690-6903; or
By Internet, at http://www.proxyvote.com.

Shareholders whose shares of our common stock are held in “street name” must either direct the record holder of their shares as to how to vote their shares of common stock or obtain a proxy from the record holder to vote at the meeting.  “Street name” shareholders should check the voting instruction cards used by their brokers or nominees for specific instructions on methods of voting, including by telephone or using the Internet.

Participants in the Daktronics, Inc. 401(k) Plan (the “401(k) Plan”) who hold our common stock in the 401(k) Plan are entitled to instruct the trustee of the 401(k) Plan as to how to vote their shares.  Each participant will receive a Notice of Internet Availability of Proxy Materials, similar to the Notice received by the registered holders described above.  Each participant will have the ability to access the proxy materials over the Internet and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found on the notice as described above.  The participants can vote on matters as described above.  The votes will then be tabulated and submitted for vote by the trustee.  If a participant does not timely vote, the trustee will vote the shares allocated to that participant in the same proportion as the shares that are voted by all other participants under the 401(k) Plan.

Proxies
All shares entitled to vote and represented by properly submitted proxies received before the Annual Meeting will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies if they are not revoked before the vote as described below. If no instructions are indicated on a properly submitted proxy, the shares represented by that proxy will be voted as recommended by the Board of Directors. If any other matters are properly presented for consideration at the Annual Meeting, the proxy holders will have discretion to vote on those matters in accordance with their best judgment.
 
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted.  A proxy may be revoked by either:

delivering a written notice of revocation to the Secretary of the Company,
submitting another proxy bearing a later date,
voting by telephone or via the Internet after your prior telephone or Internet vote, or
attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not itself revoke a proxy).

Expenses of Solicitation
All expenses of this solicitation, including the cost of preparing and mailing this Proxy Statement, will be borne by us. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of stock for their reasonable expenses in forwarding solicitation material to such beneficial owners. Our Directors, officers and employees may also solicit proxies in person or by telephone, e-mail, letter or facsimile. Such Directors, officers and employees will not be additionally compensated, but they may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation.
 
2


Procedure for Submitting Shareholder Proposals
Shareholders may present proper proposals for inclusion in our proxy materials for consideration at the next annual meeting of our shareholders by submitting their proposals to us in a timely manner. In order to be included in our proxy materials for the next annual meeting, shareholder proposals must be received by us no later than March 13, 2012 and must otherwise comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934.

For any proposal that is not submitted for inclusion in next year’s Proxy Statement but instead is sought to be presented directly at the 2012 annual meeting of shareholders, management may vote proxies in its discretion if we: (a) receive notice of the proposal before the close of business on May 29, 2012 and advise shareholders in the 2012 Proxy Statement about the nature of the matter and how management intends to vote on such matter or (b) do not receive notice of the proposal before the close of business on May 29, 2012.  Notices of intention to present proposals at the 2012 annual meeting of shareholders should be addressed to Corporate Secretary, Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006.

Other Business
At the date of this Proxy Statement, management knows of no other business that may properly come before the Annual Meeting.  However, if any other matters properly come before the Annual Meeting, the individuals named in enclosed form of the proxy will vote the proxies received in response to this solicitation in accordance with their best judgment on such matters.

Financial Information
Our fiscal 2011 Annual Report to Shareholders, including, but not limited to, our consolidated balance sheets as of April 30, 2011 and May 1, 2010 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended April 30, 2011, accompanies these materials. A copy of the fiscal 2011 Annual Report to Shareholders may be obtained without charge upon request to the Company. The fiscal year 2011 Annual Report to Shareholders can also be accessed on our website at http://www.daktronics.com by selecting “Investors,” then “Financials” and then “Annual Reports.” In addition, we will provide without charge to any shareholder, upon the shareholder’s written request, a copy of our Annual Report on Form 10-K for the year ended April 30, 2011 filed with the Securities and Exchange Commission.  Requests should be directed to Investor Relations, Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006.

S ECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of common stock as of June 27, 2011, the Record Date, by each of our Directors, by each executive officer named in the Summary Compensation Table, by all Directors and executive officers as a group, and by each shareholder who is known by us to own beneficially more than 5% of our outstanding common stock.
 
Name and Address of Beneficial Owners
 
Note
 
Amount and Nature of
Beneficial Ownership (1)
 
Percentage of
Outstanding Shares (2)
5% Beneficial Owners:
               
    BlackRock, Inc.
      40 East 52 nd Street
      New York, NY 10022
 
(15)
 
2,619,461
   
6.3
%
Named Officers and Directors:
               
 
Dr. Aelred J. Kurtenbach
 
(3)
 
2,460,962
   
5.9
%
 
James B. Morgan
 
(4)
 
1,490,001
   
3.6
%
 
Frank J. Kurtenbach
 
(5)
 
771,799
   
1.9
%
 
Byron J. Anderson
 
(6)
 
61,896
   
*
 
 
Robert G. Dutcher
 
(7)
 
57,322
   
*
 
 
Nancy D. Frame
 
(8)
 
87,403
   
*
 
 
John L. Mulligan
 
(9)
 
79,654
   
*
 
 
Bruce W. Tobin
 
(10)
 
5,784
   
*
 
 
James A. Vellenga
 
(11)
 
76,483
   
*
 
 
William R. Retterath
 
(12)
 
94,759
   
*
 
 
Reece A. Kurtenbach
 
(13)
 
360,054
   
*
 
 
Bradley T. Wiemann
 
(14)
 
190,090
   
*
 
All Directors and executive officers as a group
   (12 persons, consisting of those named above)
     
5,736,207
   
 
13.8
%

*
Less than 1%
(1)
Each person has sole voting and sole dispositive power with respect to all outstanding shares, except as noted.  The individuals holding restricted shares have the power to vote but not the power to dispose of such shares.
(2)
Based on 41,707,633 shares of common stock outstanding as of June 27, 2011.  Such number does not include 492,466 shares of common stock subject to stock options outstanding as of June 27, 2011.  Each figure showing the percentage of outstanding shares owned beneficially has been calculated by treating as outstanding and owned the shares upon which could be purchased by the indicated person(s) on June 27, 2011 or within 60 days of June 27, 2011 upon the exercise of stock options or vesting of restricted stock and restricted stock units.
(3)
Includes 2,164 shares held through the 401(k) Plan, 1,026,500 shares held by his spouse, 150,000 shares held in Medary Creek LLLP.  Medary Creek LLLP is a limited liability limited partnership where Al and Irene Kurtenbach are the general partners.
(4)
Includes 72,600 shares subject to options and 41,611 shares held through the 401(k) Plan.
(5)
Includes 3,198 shares held through the 401(k) Plan and 215,150 shares held by his spouse.
(6)
Includes 44,821 shares subject to exercisable options, 2,153 shares of restricted stock which vest on August 26, 2011 and 11,509 shares subject to options which become exercisable on August 26, 2011.
(7)
Includes 36,988 shares subject to exercisable options and 2,153 shares of restricted stock which vest on August 26, 2011.
(8)
Includes 28,988 shares subject to exercisable options and 2,153 shares of restricted stock which vest on August 26, 2011.
(9)
Includes 37,661 shares subject to exercisable options, 2,153 shares of restricted stock which vest on August 26, 2011 and 11,509 shares subject to options which become exercisable on August 26, 2011.
(10)
Includes 4,860 shares subject to exercisable options and 924 shares of restricted stock which vest on August 26, 2011.
(11)
Includes 36,821 shares subject to exercisable options, 2,153 shares of restricted stock which vest on August 26, 2011 and 11,509 shares subject to options which become exercisable on August 26, 20111, and 5,000 shares held by spouse.
(12)
Includes 68,600 shares subject to options and 10,476 shares held through the 401(k) Plan.
(13)
Includes 63,300 shares subject to options, 17,957 shares held through the 401(k) Plan, 17,400 shares held by his spouse and 44,800 shares held by his children.
(14)
Includes 63,300 shares subject to options, 24,937 shares held through the 401(k) Plan and 436 shares held by his spouse.
(15)
Reflects information as of March 31, 2011 derived from an amendment to Schedule 13G filed with the Securities and Exchange Commission by BlackRock, Inc., on April 21, 2011. As set forth in the amendment to Schedule 13G, as amended, BlackRock, Inc. has sole voting and dispositive power as to 2,619,461 shares.
 
3

 
P ROPOSAL ONE
ELECTION OF DIRECTORS

General
Our business and affairs are managed under the direction of our Board of Directors, which currently consists of nine individuals divided into three classes serving staggered three-year terms of office. There are three Directors (Dr. Aelred J. Kurtenbach, Robert G. Dutcher and Nancy D. Frame) whose terms expire at the 2011 Annual Meeting  or until their successors are named, three Directors (Byron J. Anderson, Frank J. Kurtenbach and James A. Vellenga) whose terms expire at the 2012 annual meeting of shareholders or until their successors are named, and three Directors (James B. Morgan, John L. Mulligan and Bruce W. Tobin) whose terms expire at the 2013 annual meeting of shareholders or until their successors are named.  The Nominating and Corporate Governance Committee has recommended to the Board of Directors that Dr. Kurtenbach, Mr. Dutcher and Ms. Frame, who are all currently Directors, be nominated as the Directors to be elected at the 2011 Annual Meeting, and the Board of Directors has approved that recommendation. All nominees have indicated a willingness to serve if elected.  If any nominee becomes unable to serve before the Annual Meeting, the proxies received in response to this solicitation will be voted for a replacement nominee selected in accordance with the best judgment of the proxy holders named in the proxy.
 
Vote Required
See “Procedural Matters – Vote Requirements” for a description of the votes required for the election of Directors.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE ELECTION OF THE NOMINEES FOR DIRECTORS NAMED BELOW.
 
4

 
Directors and Nominees for Director
The following table sets forth the name, age and certain other information about each nominee for Director as of the Record Date:
 
Name
 
Age
 
Principal Occupation
 
Committees Served On
Dr. Aelred J. Kurtenbach
 
77
 
Chairman of the Board
 
None
Robert G. Dutcher
 
66
 
Retired
 
Compensation (Chairperson)
Nancy D. Frame
 
66
 
Retired
 
Nominating and Governance (Chairperson), Compensation
 
Aelred J. Kurtenbach, Ph.D. is a co-founder of the Company and has served as a Director and Chairman of the Board since its incorporation in 1968.  He served as President of the Company until 1999, Chief Executive Officer until 2001, and Treasurer until 1993.  Dr. Kurtenbach holds B.S., M.S. and Ph.D. degrees in electrical engineering from the South Dakota School of Mines and Technology, the University of Nebraska and Purdue University, respectively.  Dr. Kurtenbach brings to the Board an in-depth perspective of our business and industry derived from his experience as co-founder of the company, as the Chief Executive Officer of the Company since its founding through 2001, and as Chairman of the Board since then. 

Robert G. Dutcher is currently Strategic Advisor Lead Member of MEDRAD, Inc.  From April 2008 through March 2009, he was President and Chief Executive Officer of the Cardiovascular Division of MEDRAD, Inc., an affiliate of Bayer AG.  From 2001 until April 2008, he was the Chairman, President and Chief Executive Officer of Possis Medical, Inc., a publicly-held medical device company located in Minneapolis, Minnesota, which was acquired by MEDRAD, Inc. in April 2008.  From 1993 until April 2008, he served as its President and Chief Executive Officer.  Before joining Possis Medical in 1985, he was with Medtronic, Inc. for 12 years, most recently as Director of Research and Development.  He previously worked in an engineering capacity for Control Data Corporation and Honeywell, Inc.  Mr. Dutcher holds a B.S. degree in electrical engineering from South Dakota State University and an M.S. degree in electrical engineering from the University of Minnesota.  He has been a Director of the Company since 2002 and chairman of the Compensation Committee since 2005.  Mr. Dutcher brings to the Board extensive knowledge in driving profitable growth in technology driven industries from his experience in leading R&D at Medtronics, and as CEO of Possis Medical, a small cap publicly held organization.

Nancy D. Frame was Deputy Director of the U. S. Trade and Development Agency from 1986 to 1999, when she retired.  As a senior executive in this federal government agency, she was responsible for managing its day-to-day operations, budget, system of financial controls, and ethics program. From 1980 to 1986 she was Assistant General Counsel at the U.S. Agency for International Development, where she was in charge of all legal matters affecting personnel, labor relations and ethics.  Before that she held various legal positions in the areas of international trade and commercial law.  She has a law degree from Georgetown University, Washington, D.C. and a B.S. degree from South Dakota State University.  She has been a Director of the Company since 1999 and chairperson of the Nominating and Corporate Governance Committee since 2004.  She also serves as a member of the Compensation Committee.  Ms. Frame brings to the Board a legal and managerial background which is particularly pertinent to corporate governance and risk oversight and to understanding the legal issues faced by the Company, especially as they relate to our international development. 

The identity of the remaining Directors and certain information about them as of the Record Date are set forth below:

Byron J. Anderson is currently retired.  Before his retirement, from 1999 to 2004 he served at Agilent Technologies, Inc. as Senior Vice President serving customers and managing business groups located in the United States, Europe, Japan and Asia, which included worldwide sales and service activities.  Before working with Agilent, he held various senior positions with Hewlett-Packard Company, ending his career there as a vice president responsible for a business unit serving the worldwide communications industry.  He holds an M.B.A. from Harvard University and an electrical engineering degree from South Dakota State University.  He has been a Director of the Company since 2005.  Mr. Anderson brings to the Board significant experience in high-tech industry with a unique knowledge of supply chains, international development, foreign trade and corporate strategy obtained from his years in management of large multi-national, technology companies. 

Frank J. Kurtenbach joined the Company in 1979 as Sales Manager of the Standard Scoreboard Division, which was expanded to include other products in 1981.  He served as Sales Manager for the Company from 1982 through 1993, as a Director since 1984 and as a Vice President since 1993.  Currently Mr. Kurtenbach is employed on a part-time basis with the Company.  Mr. Kurtenbach has an M.S. degree in Health Science and recreation from South Dakota State University.  Aelred Kurtenbach and Frank Kurtenbach are brothers. Mr. Kurtenbach brings to the Board his experience and knowledge of many years in developing our sales channels, distribution and in developing our talent, in particular, our emphasis on affiliations with colleges and universities.  He has been a key leader in this regard for more than 29 years.
 
5
 
James B. Morgan joined the Company in 1969 as a part-time engineer while earning his M.S. degree in electrical engineering from South Dakota State University.  He became President and Chief Operating Officer of the Company in 1999 and Chief Executive Officer in 2001.  He served as its Vice President, Engineering, with responsibility for product development, contract design, project management and corporate information systems, from 1976 to 1999.  Mr. Morgan has also served as a Director of the Company since 1984.  Mr. Morgan brings to the Board his experience and knowledge of our business and industry derived from his current position as Chief Executive Officer and his experience of over 40 years working for the Company.  
 
  John L. Mulligan has been a Director and has served as chairman of the Audit Committee since 1993.  Since 1993, he has been employed by a number of financial institutions as a financial advisor and Vice President.  He has been employed by UBS since May 2008 and, from 1999 through May 2008, he was with Morgan Stanley.  From 1967 to March 1990, he served as President, Chairman, Chief Executive Officer and Director of American Western Corporation, a publicly-held company.  Mr. Mulligan also served as a certified public accountant early in his career.  Mr. Mulligan brings to the Board a significant amount of financial expertise from his experience in the financial services industry as well as a deep understanding of shareholder issues and concerns based on his more than 20-year career as chief executive officer of a public company.

Bruce W. Tobin, was elected as a Director in February 2011 to fulfill the term of Duane Sander.  Prior to his retirement in April 2011, Mr. Tobin worked for the 3M Company, most recently as the Vice President of Finance for International and Corporate Staff Services.  He began his career with the 3M Company in 1974.  He holds a Bachelor of Science in Management from the University of South Dakota.  Mr. Tobin brings to the Board extensive experience in financial and strategic matters with a particular focus on international trade and expansion through his years in working with 3M.  He also brings an understanding of external financial reporting, including SEC reporting. 

James A. Vellenga was elected as a Director in 1997 and is currently retired.  He spent 46 years in the computer and integrated circuit industry in various senior management positions involved in product development and operations.  His most recent position was as President and Chief Executive Officer of BSFX Corp., a company involved in the research of fibers for reinforcing concrete.  He holds a B.S. degree in electrical engineering from South Dakota State University.  Mr. Vellenga brings to the Board a significant amount of business experience and leadership in high-tech businesses coupled with deep knowledge of growth companies and corporate strategies related to high-tech products from his years of experience in building companies such as Data 100 Corp, Lee Data Corporation, Aetrium Inc. and BSFX Corp.             

Independent Directors
Our Nominating and Corporate Governance Committee has determined that each of Messrs. Tobin, Vellenga, Mulligan, Dutcher and Anderson and Ms. Frame are “independent,” as that term is defined in Rule 5605(a)(2) of the NASDAQ Listing Rules.  Accordingly, the Board is composed of a majority of independent Directors as required by the NASDAQ Listing Rules.

C ORPORATE GOVERNANCE
 
Board Leadership Structure
The Board of Directors adheres to governance principles that assure the integrity and continued viability of the Company.  It strives continually for excellence in the execution of its duties.  The Board has responsibility for management and risk oversight and for providing strategic guidance to the Company.  The Board believes that it must continue to improve itself through continuing education and by ensuring that its members understand the industries and the markets in which the Company operates.  The Board believes that it must stay well-informed about the issues, challenges and opportunities facing Daktronics so that the Board members can properly exercise their fiduciary responsibilities to our shareholders.  As part of this, the Board is kept informed of our business through discussion with the Chief Executive Officer and other officers, by reviewing material provided to them and by participating in meetings of the Board and its Committees.

Dr. Aelred Kurtenbach, one of our founders and our former Chief Executive Officer, serves as Chairman of the Board.  Mr. James Morgan, who joined Daktronics in 1969, was named Chief Executive Officer in 2001.  This separation of the positions of Chairman and Chief Executive Officer has served the Company and our shareholders well.  In addition, Ms. Nancy Frame has served as our Lead Independent Director since 2005.
 
6

We believe that we are best served at this time by separating the roles of the Chief Executive Officer and the Chairman of the Board.  This separation allows us to benefit from the long-term history of managing the Company that the Chairman brings to the discussion and which complements the understanding of the current challenges and opportunities that the Chief Executive Officer brings to the Board.  It also ensures that our strategies and objectives are developed as a result of the consideration of a wide array of alternative measures.

The Chairman conducts the actual Board meetings, and the Lead Independent Director presides over the executive sessions of the independent Directors.  The Lead Independent Director also serves as chairperson of the Nominating and Corporate Governance Committee, which is the principal Board committee charged with responsibility for the Board’s governance structure.  In this dual role, the Lead Independent Director is able to bring to the Board a special focus on governance issues.  She also facilitates the ability of non-management Directors to fulfill their responsibilities, builds consensus among Board members and provides a structure for communicating any concerns the non-management Directors may have directly to our executive management.

Our governance practices are compliant with the NASDAQ Listing Rules and the corporate governance regulations of the Sarbanes-Oxley Act of 2002.  Among other things, these practices include the following:

The Nominating and Corporate Governance Committee reviews with the Board annually the composition of the Board as a whole, including the Directors’ independence, skills, experience, age, diversity and availability of service to the Company.
The Nominating and Corporate Governance Committee recommends Director candidates for approval by the Board and election by the shareholders, taking into account the company’s need for diverse skills, professional experiences, backgrounds and other qualities to ensure a variety of viewpoints.
The Board conducts periodic self-evaluations facilitated by the Nominating and Corporate Governance Committee.
The independent directors meet in conjunction with regularly scheduled quarterly Board meetings and at other appropriate times.
The Board and all Board Committees are authorized to hire their own advisors as necessary to fulfill their obligations.

Meetings of the Board of Directors and Committees
During fiscal 2011, the Board of Directors held six meetings (including regularly scheduled and special meetings), the Audit Committee met eight times, the Compensation Committee met four ­times, and the Nominating and Corporate Governance Committee met three times.  All of the Directors attended at least 75% of the aggregate of all meetings of the Board of Directors and Committees, if any, upon which they served.  All Directors who were Directors at the time attended the annual meeting of shareholders held in 2010.

Executive Sessions of the Board
The Board has formally adopted a policy of meeting in executive session, with only independent Directors being present, on a regular basis.  During fiscal 2011, the independent Directors of the Board met in executive session four times.

Annual Meeting Attendance Policy
As set forth in our Corporate Governance Guidelines, members of the Board of Directors are expected to devote sufficient time and attention to prepare for, attend and participate in Board meetings, shareholder meetings and meetings of Committees of the Board on which they serve.

Board’s Role in Risk Oversight
The Board takes an active role in risk oversight both as a full Board and through its Committees. Through detailed reviews, discussions and presentations by the heads of our various businesses, the Board reviews and advises with respect to our business strategies and financial plans, with attention and focus on the risks to achievement of these strategies and plans. Such risks include those inherent in our businesses as well as the risks from external sources such as competitors, the economy, credit markets and regulatory and legislative developments.  In addition, the heads of certain of our key functional areas, such as Information Technology, Legal, Finance and Human Resources, regularly update the Board on risks in their areas.

The various Committees of the Board are also responsible for specific areas of risks.  The Audit Committee meets regularly with management and our independent registered public accounting firm to oversee our financial risk management processes, controls and capabilities. The Audit Committee also oversees and reviews with management certain aspects of our credit, litigation, and currency risks and other finance matters. In addition, the Audit Committee reviews and monitors our procedures regarding the receipt, retention and treatment of complaints regarding internal accounting, accounting controls or audit matters.  The Compensation Committee oversees our executive compensation arrangements and certain benefit plans.  This includes the identification and management of risks that may arise from our compensation policies and practices.  The Nominating and Corporate Governance Committee has oversight of corporate governance, including establishing practices and procedures that promote good governance and thus mitigate governance risk, and it is also responsible for reviewing the performance of the Board, its Committees and their members. These Committees report on these topics, including risks, as necessary to the full Board. 
 
7

 
Code of Conduct
The Board of Directors has adopted our Code of Conduct, which applies to all of our employees, officers and Directors as described in our Annual Report to Shareholders.  Included in the Code of Conduct are ethics provisions that apply to our Chief Executive Officer, Chief Financial Officer, and all other financial and accounting management employees. Copies of the Code of Conduct are available on our website at http://www.daktronics.com .  The Nominating and Corporate Governance Committee reviews the Code of Conduct annually and oversees its implementation.

Policy and Procedures with Respect to Related Person Transactions
Our Board of Directors has adopted a written policy and procedure with respect to related person transactions, which the Audit Committee oversees.  Under the policy, a “related party transaction” is a transaction, arrangement or relationship in which the Company was, is or will be a participant, the amount involved exceeds $120,000, and in which any “related person” had, has or will have a direct or indirect material interest.  The policy generally defines a “related person” as a Director, executive officer or beneficial owner of more than 5% of any class of our voting securities and any immediate family member of any of the foregoing persons.

Under the policy, prior notice must be provided to our Corporate Counsel of the facts and circumstances involved in the potential related person transaction.  If the Corporate Counsel determines that the transaction is a related person transaction, he must submit it to the Audit Committee or the Chair of the Audit Committee for review and, if appropriate, approval.  The policy provides that, on an annual basis, the Audit Committee shall review any previously approved related person transaction that is ongoing.  The policy also provides that proposed charitable contributions or pledges of charitable contributions of at least $120,000 by the Company made to or at the request of a related person are subject to prior review by the Audit Committee or the Chair of the Audit Committee.   

Committees of the Board of Directors
The Board of Directors currently has three standing Committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.
 
Audit Committee.   During fiscal 2011, our Audit Committee consisted of Mr. Mulligan (Chairperson), Mr. Vellenga, Ms. Frame (Committee member until February 2011) and Mr. Tobin (Committee member since February 2011).  The Board of Directors has determined that each Audit Committee member is independent under Rule 5605(a)(2)  of the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act of 1934 (“Exchange Act”).  The Board has determined that Mr. Mulligan and Mr. Tobin are qualified as “audit committee financial experts,” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K.  The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities concerning the quality and integrity of our financial reports and related filings with the Securities and Exchange Commission (the “SEC”).  In fulfilling this role, the Audit Committee, among other things, oversees the accounting and financial reporting process and audits of the financial statements and related SEC filings, appoints and provides for the compensation of  our independent registered public accounting firm, reviews the scope and findings of the completed audit, reviews the adequacy and effectiveness of our accounting policies and system of internal accounting controls and oversees our policy and procedures with respect to related person transactions. A copy of the Audit Committee’s Charter is available on our website at http://www.daktronics.com .

Compensation Committee .     During fiscal 2011, our Compensation Committee consisted of Mr. Dutcher (Chairperson), Mr. Anderson, Mr. Vellenga (Committee member until February 2011) and Ms. Frame (Committee member since February 2011).  All of the Compensation Committee members satisfy the independence requirements of the NASDAQ Listing Rules, as determined by the Board of Directors. The Compensation Committee annually reviews and acts upon the Chief Executive Officer’s compensation package, reviews and approves the compensation policy for the other executives, and acts upon management’s recommendations for executives concerning employee equity incentives, bonuses and other compensation and benefit plans.  A copy of the Compensation Committee’s Charter is available on our website at http://www.daktronics.com .
 
8

 
Nominating and Corporate Governance Committee    During fiscal 2011, our Nominating and Corporate Governance Committee (the “Nominating Committee”) consisted of Ms. Frame (Chairperson), Mr. Anderson, Dr. Sander (Committee member until February 2011) and Mr. Vellenga (Committee member since February 2011).  The Board of Directors has determined that all of the Nominating Committee members satisfy the independence requirements of the NASDAQ Listing Rules. Our Nominating Committee advises and makes recommendations to the Board of Directors on all matters concerning the selection of candidates as nominees for election as Directors, develops and recommends to the Board of Directors corporate governance guidelines, oversees our Code of Conduct and provides oversight with respect to corporate governance and ethical conduct. It also facilitates the annual review of the performance of the Board of Directors.  The responsibilities of the Nominating Committee are set forth in the Nominating and Corporate Governance Committee Charter.  Copies of the Nominating Committee’s Charter and our Corporate Governance Guidelines are available on our website at http://www.daktronics.com .
 
The information below describes the criteria and process that the Nominating Committee uses to evaluate future candidates to the Board of Directors:

Director Qualification
Our Directors take a critical role in guiding our strategic direction, and they oversee the performance of our management team.  When Board candidates are considered, they are evaluated based upon various criteria, such as their broad-based business and professional skills and experiences, experience serving as management or on the board of directors of other organizations, concern for the long-term interests of the shareholders, technology company experience, financial literacy, personal integrity in judgment and their willingness to be prepared and active participants at Board and committee meetings.  The Nominating and Corporate Governance Committee and the Board seek to attract and attain highly qualified Directors who have sufficient time to attend to their duties and responsibilities to the Company.  Recent developments in the economy, as well as in corporate governance and financial reporting, have resulted in an increased demand for such highly-qualified and productive public company directors.

The Nominating and Corporate Governance Committee and the Board seek members who will contribute to our overall corporate goals, taking into account the Company’s responsibility to its shareholders, industry leadership, customer success, positive working environment, community responsibility and integrity in financial reporting and business conduct. Candidates are selected based upon their potential contributions to the long-term interests of shareholders.  Diversity of a candidate’s skills and experiences are considered as part of the nomination process.
 
The Nominating and Corporate Governance Committee then reviews selected candidates and makes a recommendation to the Board.  The Nominating and Corporate Governance Committee may seek input from other Board members or senior management in identifying candidates.

Each candidate for Director must possess the following specific minimum qualifications:

Each candidate shall be an individual who has demonstrated integrity and ethics in his or her professional life and has established a record of professional accomplishment in his or her chosen field.
No candidate shall have any material personal, financial or professional interest in any present or potential competitor of the Company.
Each candidate shall be prepared to participate fully in activities of the Board of Directors, including active membership in at least one Committee of the Board of Directors (in the case of independent Directors) and attendance at, and active participation in, meetings of the Board of Directors and the Committee(s) of the Board of which he or she is a member.

Shareholder Proposals for Nominees
The Nominating and Corporate Governance Committee will consider written proposals from shareholders for nominees for Director. Any such nominations should be submitted to the Nominating and Corporate Governance Committee in the care of our Corporate Secretary and should include (at a minimum) the following information: (a) all information relating to such nominee that is required to be disclosed in Schedule 14A under the Exchange Act (including appropriate biographical information); (b) other board memberships; (c) such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director, if elected; (d) the name(s) and address(es) of the shareholder(s) making the nomination and the number of shares of our common stock which are owned beneficially and of record by such shareholder(s); and (e) a statement as to the qualifications of the nominee.  Shareholder proposals should be submitted by the March 13, 2012 deadline described in this proxy statement under the caption, “Procedural Matters – Procedure for Submitting Shareholder Proposals” above.
 
9


The Nominating Committee will not change the manner in which it evaluates candidates for Board nominees, including the applicable criteria set forth above, based on whether the candidate was recommended by a shareholder.  To date, we have not received any shareholder proposals to nominate a Director.

Process for Identifying and Evaluating Nominees
The process for identifying and evaluating nominees to the Board of Directors will be initiated by identifying candidate(s) who meet the criteria for selection as a nominee and have the specific qualities or skills being sought based on input from members of the Board and others to the extent determined by the Nominating and Corporate Governance Committee. The candidate(s) will be evaluated by the Nominating and Corporate Governance Committee by reviewing the candidates’ biographical information and qualifications and, if necessary, by checking references.  Qualified nominees shall meet with at least one member of the Nominating and Corporate Governance Committee and with at least one other member of the Board.  The Nominating and Corporate Governance Committee will decide which of the prospective candidates to recommend to the Board for selection as nominees to be presented for the approval of the shareholders or for appointment to fill a vacancy.

Board Nominees for the Annual Meeting
The Board nominees for this Annual Meeting – Aelred J. Kurtenbach, Robert G. Dutcher and Nancy D. Frame – were selected by the Board of Directors unanimously in June 2011 upon the recommendation of the Nominating Committee.

Board of Directors’ Evaluation
On an ongoing basis, the Nominating Committee facilitates a process to determine whether the Board of Directors and its Committees are functioning effectively.  The results of this process are reported to the Board for discussion.

How to Contact the Board of Directors
Shareholders wishing to contact our Directors may do so by writing to them at the following address: Corporate Secretary, Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006. All letters received will be forwarded to the Directors.  

Compensation Committee Interlocks and Insider Participation
During fiscal 2011, none of our executive officers served on the board of directors or compensation committee of another company that had an executive officer who served on our Board of Directors or our Compensation Committee.  Dr. Sander was a part-time employee during the Company’s early years.

Director Compensation
The following table sets forth information about the compensation paid to and earned by our Directors for the fiscal year ended April 30, 2011:

FISCAL YEAR 2011 DIRECTOR COMPENSATION
 
Name (1)
 
Fees Earned or
Paid in Cash (2)
   
Stock Awards (3)
   
Option
Awards (4)(5)
 
Total
Compensation
Byron J. Anderson
 
$
24,000
 
$
20,000
 
$
45,000
 
$
89,000
Robert G. Dutcher
   
24,000
   
20,000
   
-
   
44,000
Nancy D. Frame
   
27,500
   
20,000
   
-
   
47,500
John L. Mulligan
   
26,000
   
20,000
   
45,000
   
91,000
Dr. Duane E. Sander
   
16,500
   
20,000
   
45,000
   
81,500
Bruce W. Tobin
   
6,000
   
10,000
   
22,500
   
38,500
James A. Vellenga
   
26,000
   
20,000
   
45,000
   
91,000

(1)
 
As employees of the Company, James B. Morgan, the President and Chief Executive Officer, Aelred J. Kurtenbach, Chairman of the Board, and Frank J. Kurtenbach, Vice President, received no Director fees from us during fiscal year 2011 and are therefore not included in the table.
(2)
 
Consists of fees earned for fiscal year 2011 and paid in fiscal year 2011 or fiscal year 2012.
(3)
 
On August 26, 2010, Mr. Mulligan, Dr. Sander, Mr. Dutcher, Mr. Anderson, Mr. Vellenga and Ms. Frame each received 2,153 restricted shares of our common stock with a grant date fair value of $20,000 which vest on August 26, 2011 if they are then Directors of the Company.  On February 24, 2011, upon his election to the Board of Directors, Mr. Tobin received 924 restricted shares of our common stock with a grant date fair value of $10,000 which vest on August 26, 2011 if he is then a Director of the Company.  In the case of Dr. Sander, these restricted shares terminated upon his resignation from the Board of Directors in February 2011.  The amounts are computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”).  Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical accounting policies and estimates – Stock-based compensation” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2011 for a discussion of the assumptions used in calculating the expense under ASC 718.  This portion of the Annual Report on Form 10-K is included in our 2011 Annual Report to Shareholders.
(4)
 
As of April 30, 2011, the following non-employee Directors had outstanding options to purchase the following number of shares of our common stock, all of which had been granted under our 2001 Outside Directors Stock Option Plan or 2007 Stock Incentive Plan:  Mr. Anderson (56,330 shares, all of which were exercisable), Mr. Dutcher (43,481 shares, of which options to purchase 36,987 shares were exercisable), Ms. Frame  (35,481 shares, of which options to purchase 28.988 shares were exercisable), Mr. Mulligan (49,170 shares, all of which were exercisable), Mr. Tobin (4,860 shares, all of which were exercisable) and Mr. Vellenga (48,330 shares, all of which were exercisable).
(5)
 
On August 26, 2010, Dr. Sander, Mr. Anderson, Mr. Mulligan and Mr. Vellenga each received a stock option award of 11,509 shares with a grant date fair value of $45,000.  On February 24, 2011, Mr. Tobin received a stock option award of 4,860 shares with a grant date fair value of $22,500.  The stock option award granted to Dr. Sander expired upon his resignation from the Board of Directors in February 2011.  The grant date fair values were computed in accordance with ASC 718.  Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical accounting policies and estimates – Stock-based compensation” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2011 for discussion of the assumptions used in calculating the expense under ASC 718.  This portion of the Annual Report on Form 10-K is included in our 2011 Annual Report to Shareholders.
 
 
10

 
Independent Director Fees.   For fiscal 2011, each independent Director received an annual retainer of $12,000 (or a pro-rata  in the case of Mr. Tobin and Dr. Sander), plus $2,000 per meeting, for each Board of Directors meeting attended in person and the following annual retainers for Committee membership:

   
Chair
 
Other 
Members
 
Audit Committee
 
$
6,000
 
$
4,000
 
Compensation Committee
   
4,000
   
2,000
 
Nominating and Corporate Governance Committee
   
4,000
   
2,000
 
               
The retainers for Board and Committee service are included in the table above entitled “Fiscal Year 2011 Director Compensation”.
 
2001 Directors Stock Option Plan.   The 2001 Outside Directors Option Plan (the “2001 Plan”) was intended to assist us in attracting, motivating and retaining well-qualified individuals to serve as our Directors.  The 2001 Plan provided for the automatic grant of options up to a predefined level.  The only individuals eligible to receive options under the Directors Plan were members of our Board of Directors who were not our employees.  The 2001 Plan provided that the total number of shares of our common stock that may be purchased upon the exercise of options could not exceed 800,000 shares, subject to adjustment.  The 2001 Plan was administered by our Board of Directors through our Compensation Committee.
 
During the term of the 2001 Plan, all grants of stock options were automatically awarded at or below the maximum level permitted by the 2001 Plan, which was up to 36,000 shares upon a Director’s initial appointment or re-election to the Board of Directors.   In connection with the implementation of the 2007 Stock Incentive Plan, the Board of Directors terminated the right to grant any additional options under the 2001 Plan.  As of June 27, 2011, options to purchase 144,000 shares were outstanding under the 2001 Plan.
 
All options granted to non-employee Directors under the 2001 Plan were non-qualified options not intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986.  Payment for shares upon exercise of any automatic or discretionary options granted to non-employee Directors under the 2001 Plan may be made in cash, in shares of our common stock that have been owned for more than six months having an aggregate fair market value on the date of exercise which is not less than the exercise price of the shares of common stock being purchased, partly in cash and partly in such shares, or by the delivery of irrevocable instructions to a broker to sell shares of common stock obtained upon the exercise of an option and to deliver to us an amount out of the proceeds of such sale equal to the aggregate exercise price of the shares being purchased.
 
2007 Stock Incentive Plan.   The 2007 Stock Incentive Plan (the “2007 Plan”) is intended to attract and retain executives, employees, Board members and consultants and enable such individuals to participate in our long-term success and growth by granting various types of equity incentives which create a proprietary interest in the Company.
 
The 2007 Plan permits the Board of Directors to award various forms of equity compensation, including options, restricted stock, restricted stock units and deferred stock, to eligible recipients, including members of the Board.  Under the 2007 Plan, the Board has provided for the automatic grant of options to each non-employee Director upon his or her initial appointment and upon re-election to the Board of Directors and for the automatic grant of restricted stock to each non-employee Director upon his or her initial appointment and upon re-election to the Board and each year thereafter during the Director’s term of appointment.
11

 
The number of shares underlying the options automatically granted under the 2007 Plan to non-employee Directors is determined in accordance with ASC 718 such that the total grant date fair value of the annual option grant equals $45,000.  In the case of a Director initially appointed during a year, the grant is based on the portion of the year expected to serve.  The automatic options granted prior to fiscal 2010 vest over three years, and options granted during and after fiscal 2010 vest in one year, and they generally have the same terms and conditions as the automatic options granted under the 2001 Plan.  The 2007 Plan requires that all options granted under the 2007 Plan have an exercise price equal to the fair market value of our common stock on the date of grant.  All options granted to non-employee Directors under the 2007 Plan are non-qualified options not intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986.  Payment for shares upon exercise of any automatic or discretionary options granted to non-employee Directors under the 2007 Plan may be made in cash, in shares of our common stock that have been owned for more than six months having an aggregate fair market value on the date of exercise which is not less than the exercise price of the shares of common stock being purchased, partly in cash and partly in such shares, or by the delivery of irrevocable instructions to a broker to sell shares of common stock obtained upon the exercise of an option and to deliver to us an amount out of the proceeds of such sale equal to the aggregate exercise price of the shares being purchased.
 
The number of shares of restricted stock automatically granted to non-employee Directors under the 2007 Plan is also determined in accordance with ASC 718, such that the total grant date fair value of the annual restricted stock grant equals $20,000.  The restricted stock vests one year following the grant date.  In the case of a Director initially appointed during a year, the grant is based on the portion of the year expected to serve.  These grants are included in the table above entitled “Fiscal Year 2011 Director Compensation.”
 
During fiscal 2011, Mr. Mulligan, Mr. Vellenga, Mr. Anderson and Dr. Sander each received automatic grants of options under the 2007 Plan to purchase 11,509 shares of stock, and Mr. Anderson, Mr. Vellenga, Mr. Mulligan, Dr. Sander, Ms. Frame and Mr. Dutcher received automatic grants of 2,153 shares of restricted stock. In addition, Mr. Tobin received automatic grants of options under the 2007 Plan to purchase 4,860 shares of stock and received automatic grants of 924 shares of restricted stock.  These grants are included in the table above entitled “Fiscal Year 2011 Director Compensation.” As a result of Dr. Sanders’ retirement from the Board in February 2011, the grants of options and restricted stock during fiscal 2011, which had not vested, terminated.
 
Stock Ownership and Retention Guidelines.   The Board of Directors has implemented stock ownership guidelines for Directors.  Under these guidelines, each Director is expected to achieve a target of 5,000 shares owned, excluding shares subject to options. Directors had five years from January 2007 to achieve this level of ownership.  As of the Record Date, Mr. Morgan, Dr. Kurtenbach, Mr. F. Kurtenbach, Mr. Anderson, Mr. Mulligan, Ms. Frame, Mr. Dutcher and Mr. Vellenga had met these guidelines.
 
Executive Officers
 
The following discussion sets forth information as of July 1, 2011 about our executive officers who are not Directors.
 
 
Name
 
 
Positions with the Company
 
 
Age
 
Officer
Since
William R. Retterath
 
Chief Financial Officer
 
50
 
2001
Bradley T. Wiemann
 
Vice President – Commercial and Transportation
 
48
 
2004
Reece A. Kurtenbach
 
Vice President – Live Events and International
 
46
 
2004

William R. Retterath joined the Company in 2001 as Chief Financial Officer and Treasurer. During 2001, before joining the Company, Mr. Retterath served as the Chief Financial Officer of MQSoftware, Inc. From 1999 through 2000, he was Vice President of Finance for Computer Associates, Inc. through its acquisition of Sterling Software Inc. Prior to that time, Mr. Retterath served as the Chief Financial Officer for various public and private companies and worked for a number of years with Deloitte & Touche LLP. Mr. Retterath holds a B.S. in accounting from the University of Minnesota.

Reece A. Kurtenbach joined the Company in 1991 as an applications engineer on large display projects.  In 1994, he became the manager of what is today our video products engineering group and, in 2004, was appointed Vice President, Video Systems.  In 2007, he was named Vice President, Live Events and International. Mr. Kurtenbach received a B.S. degree from South Dakota State University in electrical engineering, with minors in math and computer science.  Mr. Kurtenbach is the son of Aelred Kurtenbach.
 
12

 
Bradley T. Wiemann joined the Company in 1993 as an engineer focusing in our commercial and transportation products after spending a number of years with Rockwell International Corporation, where he was involved in flight control systems.  In 2004, he was appointed Vice President, Commercial and Transportation, which is an area where he has provided leadership for a number of years.  Mr. Wiemann holds an M.S. degree in electrical and computer engineering from the University of Iowa and a B.S. degree in electrical engineering from South Dakota State University.

S ECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934 requires that our Directors, executive officers, and persons who own more than 10% of a registered class of our equity securities (“10% Shareholders”) file with the SEC initial reports of ownership on Form 3 and reports of change in ownership on Form 4 or Form 5. Such Directors, executive officers and 10% shareholders are also required by rules of the SEC to furnish us with copies of all Section 16(a) forms that they file. To our knowledge, based solely on a review of copies of such forms submitted to us or written representations from certain reporting persons, we believe all required reports were filed on a timely basis during fiscal 2011, except that Dr. Aelred J. Kurtenbach inadvertently filed two late reports on Form 5 on March 28, 2011.  One Form 5 reported four gifts he and his spouse made in fiscal 2007 of a total of 50,000 shares of our common stock to the Al and Irene Kurtenbach Foundation, and the other Form 5 reported two gifts he and his spouse made in fiscal 2010 of a total of 150,000 shares to two grantor retained annuity trusts.

C OMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy and Components
We compete in a competitive market for personnel, both for executives and for non-executive employees.  Desirable candidates for employment may also have opportunities from many other attractive employers, such as multi-national companies, venture-backed or fast-growing technology companies and manufacturing institutions.  Our long-term success depends on our ability to develop and market innovative visual display systems and related products. In addition, the competitive nature of our business pressures us to continually improve productivity across our operations and to provide high levels of service to our customers. To achieve these goals, it is critical that we be able to attract, motivate and retain highly talented individuals at all levels of the organization.
 
The Compensation Committee of our Board of Directors bases its executive compensation programs on the same objectives that guide us in establishing all of our compensation programs:
 
Compensation should be based on the level of job responsibility, individual performance and Company performance.  As employees progress to higher levels in the organization, an increasing proportion of their pay should be linked to our performance because they are more able to affect our results.
Compensation should reward performance, and the objectives of pay-for-performance and retention must be balanced.
Compensation should reflect the value of the job in the marketplace. To attract and retain a highly skilled work force, we must remain competitive with the pay of other premier employers who compete with us for talent.
Although compensation and benefit programs and individual pay levels will reflect differences in performance, job responsibilities, geographies and marketplace considerations, the overall structure of compensation and benefit programs should be broadly similar across the organization.
To be effective, performance-based compensation programs should measure the achievement of objectives that are critical for driving our success.
Except for benefits and programs that are available to all our employees or a broad selection of our general employee population, our executives should receive few perquisites, if any, and those that are provided should receive specific approval and meet a defined business purpose of the Company.
 
The Compensation Committee is responsible for assuring that compensation for our executives is consistent with our compensation philosophy.  The Compensation Committee reviews our compensation philosophy and trends in our industry to ensure that our executive compensation program is competitive and attracts and retains talented management, motivates our executives to achieve short- and long-range corporate objectives, and aligns the motivation and interests of the executives with the interests of our shareholders.
 
The Compensation Committee administers our equity-based compensation and management incentive programs and other compensation initiatives identified by the Board.  The Compensation Committee annually reviews and approves each executive’s base pay, bonus and equity incentives, as well as our annual incentive plan under which executive officers may receive cash bonus payments.
 
13

 
We view the various components of compensation as related but distinct.  Although the Compensation Committee reviews and considers total compensation for each executive officer and for all executive officers as a group, we do not believe that significant compensation derived from one component of compensation should necessarily negate or reduce compensation from other components.  We determine the appropriate level for each compensation component based in part, but not exclusively, on the following factors:

internal equity and consistency;
individual performance;
the executive compensation paid by other companies with which we compete for executive talent; and
Company performance.

The Compensation Committee has not adopted any formal policies or guidelines for allocating compensation between long-term and currently paid-out compensation, between cash and non-cash compensation, or among different forms of non-cash compensation, although it has a preference for a material amount of “at risk” compensation based on our financial goals.  We do not believe that any of our compensation policies and practices are reasonably likely to have a material adverse effect on the Company.
 
For fiscal year 2011, our named executive officers were Dr. Aelred J. Kurtenbach, Chairman of the Board, James B. Morgan, Chief Executive Officer, William R. Retterath, Chief Financial Officer, Reece A. Kurtenbach, Vice President, and Bradley T. Wiemann, Vice President (the “Named Executive Officers”).
 
Role of Executive Officers in Compensation Decisions
 
During meetings with the Compensation Committee held throughout the year, our Chief Executive Officer presents to the Compensation Committee his recommendations regarding changes in his compensation and the compensation for our Chief Financial Officer and all vice presidents, based in part on information generated by our Human Resources Department including information about compensation at comparable companies and other sources as explained below.  The Compensation Committee discusses these recommendations and accepts or adjusts them, in whole or in part, at a meeting generally held in November of each year.  The Chief Executive Officer is not present during the Compensation Committee’s final discussions or determination of his compensation, but he participates in the discussions regarding other executive officers’ compensation.  The Vice President of Human Resources may also be present for discussions regarding compensation, excluding her own compensation.  The other executive officers are not present during the Compensation Committee’s discussions of their compensation.  The Chair of the Compensation Committee presents the Committee’s findings regarding compensation for executive officers to the Board of Directors to obtain the Board’s input and ratification.  Based on such input at these meetings, the Board of Directors, approves and adopts executive compensation, including executive salaries, bonuses, stock awards and the parameters of the annual incentive plan.
 
Setting Executive Compensation
 
In making decisions regarding elements and amounts of compensation, the Compensation Committee generally considers compensation paid to executive officers at similar levels and with similar experience and responsibilities at public companies that exhibit characteristics similar to us in terms of revenue, market capitalization, complexity and profitability.  Historically, this has included a list of companies from the lists of the Forbes 200 Best Small Companies, with a focus on technology and manufacturing, as that group of companies includes companies that exhibit the growth rates and profitability characteristics that are similar to us.
 
We also have supplemented the list with public companies that we believe to be fitting comparables within our geographical region that are involved in technology and manufacturing and, in some cases, industry related companies.   Finally, we review compensation data from Salary.com, which takes into consideration geographical considerations but excludes equity incentive compensation information.  Generally, any material changes to the compensation of any executive officer reflect changes in that individual’s position and responsibilities to the Company or changes to conform that executive’s compensation structure as compared to executives at a similar level in the peer group list.

During the review of base compensation levels for executive officers in fiscal year 2011, the Compensation Committee decided, based on our financial results, and based on the lack of increases over the prior two fiscal years, to grant increases to executive officers at levels that were consistent with the levels of increases for non-executive employees in general.  Therefore, although the Compensation Committee did consider information about market compensation for similar roles based on comparisons with benchmark companies, the Compensation Committee decided it was more important to limit increases to be consistent with other employees.  The Compensation Committee also decided to leave the non-equity compensation for the Named Executive Officers at the same level as the prior year, with the understanding that it was unlikely that any non-equity compensation would be earned by the Named Executive Officers.  As a result of this recommendation, the list of comparable companies remained the same as in the prior fiscal year and was not updated, as the Compensation Committee determined that internal consistency in compensation, as described below, was generally more important than comparison to external peers.  The list of peers was reviewed, however, to understand the trends in the executive compensation paid by our peers.
 
14

 
The following table sets forth the companies comprising the peer group list:
 
Forbes 100 Best Small Companies
 
 
Regional Public and Other Companies
 
Middleby Corp., Under Armour, Inc., Heico Corp., Raven Industries, Inc., Dril-Quip, Inc., Dolby Laboratories, Inc.
 
Cree, Inc., American Vanguard Corporation, Tennant Company, Standard Microsystems Corporation, inVentive Health Inc., FormFactor Inc., Multi-Fineline Electronix, Inc., FLIR Systems, Inc., Ceradyne, Inc., Gentex Corporation, Cymer, Inc., CIRCOR International, Inc.,  Ladish Co., Inc., The Gorman Rupp Company, Diodes Incorporated, MTS Systems Corporation, Badger Meter, Inc., Lufkin Industries, Inc., Twin Disc, Inc., Cantel Medical Corp., National Instruments Corporation, Comtech Telecommunications, Inc.
 
       
The Compensation Committee reviewed base salary along with cash and equity incentive forms of compensation that were included in these companies’ SEC filings.

The Compensation Committee is also mindful of maintaining consistency between executive compensation and compensation for employees of the Company as a whole.  The Compensation Committee has deemed it appropriate in light of current economic conditions to keep compensation levels for executives in the lower one-third of the companies in the peer group list.  To date, we have not retained any consulting firms to assist us in determining executive compensation.

Cash compensation levels for executive officers as compared to the peer group as of November 2010 were as follows: Chief Executive Officer – Bottom 7%, Chief Financial Officer – Bottom 3%, Vice Presidents – Bottom 11%.

Base Salary
Executive officers receive a base salary to compensate them for services rendered during each year.  Base salary is determined by assessing the executive’s sustained performance and his or her individual job responsibilities, including the impact of such performance on our business results, in addition to market data and comparisons to our other officers.
 
Salary levels for our Named Executive Officers are considered annually as part of our performance review process.  Any increases in the salaries of the Chief Executive Officer and other Named Executive Officers are determined by the Compensation Committee based on its assessment of the Named Executive Officers’ performance and achievement of goals  and executive officers’ compensation at comparable companies as described above.  The Committee also takes into account our financial performance, understanding that these measures need to be considered in light of current economic conditions, business opportunities and other factors.  The Compensation Committee also considers the recommendations of the Chief Executive Officer for other Named Executive Officers.  As such, the Compensation Committee does not generally focus on a limited and narrow set of financial measures in determining salaries.  Salary levels for the other executives follow the same guidelines for the Named Executive Officers.
 
Non-Equity-Based Incentive Compensation Plan
The purpose of our non-equity-based incentive compensation plan is to provide a direct financial incentive in the form of an annual cash bonus to our executive officers. The Committee recommends to the Board, and the independent Directors of the Board determine, the annual incentive bonus of the Chairman of the Board, Chief Executive Officer, Chief Financial Officer and other Named Executive Officers.  The non-equity-based incentive compensation plan is a formula-based performance cash bonus plan, with no payouts if after tax-earnings are less than 10% of shareholders’ equity at the beginning of the fiscal year, and increasing linearly to a maximum bonus which varies for each executive officer if after-tax earnings exceed 20% of beginning shareholders’ equity.  The maximum level of the bonus varies from an amount equal to three months of base salary to 7.5 months of base salary for each officer.  The maximum amount is determined by the Compensation Committee based on reference to the comparable companies identified above, current economic conditions, opportunities for increased earnings, and projected results for the year.  The Compensation Committee selected return on equity as the measure of corporate financial performance to determine non-equity-based compensation because it believed it was the most appropriate indicator of performance that will drive long-term shareholder value.  Furthermore, we have used this same measure for a number of years and found it to be a meaningful measure of performance that is closely aligned to long-term shareholder value.
 
15


The non-equity-based incentive compensation plan is administered by the Board of Directors and Compensation Committee, which have the right, at any time and at their discretion, to amend the plan, increase or decrease individual payout amounts, whether earned or unearned, or terminate the plan, in whole or in part.  Changes in the plan in recent years have been limited to changes in the targeted return on equity and the maximum bonus levels.  Changes in the maximum level of return on equity have been made to more appropriately reflect changes in expected net income performance such that the achievement of the maximum bonus would result in higher than expected earnings for the Company over the long-term and have been applied to all executive officers.  The maximum amount of the bonus for each Named Executive Officer has changed based primarily on factors described above, and it varies for each Named Executive Officer.  We also follow applicable laws and regulations regarding the recovery of any bonus, other incentive-based or equity-based compensation and profits realized from the sale of securities resulting from any misconduct on the part of an executive officer.
 
During fiscal 2011, the Chief Executive Officer was eligible for non-equity-based incentive compensation equal to approximately 63% of his base salary, and the Chief Financial Officer was eligible for non-equity-based incentive compensation equal to approximately 46% of his base salary.  The Chairman of the Board of Directors was eligible for non-equity-based incentive compensation equal to approximately 25% of his base salary, and all other Named Executive Officers were eligible for non-equity-based incentive compensation equal to 42% of their base salaries. 
 
The maximum amount of non-equity-based incentive compensation is based on our goal of providing a material amount of incentive compensation to be at risk based on the performance of the Company, while ensuring that total cash compensation (base and incentive) remains in the lower one-third of the companies in our peer group.  To achieve this result, the maximum non-equity-based incentive compensation may actually be greater than the same type of compensation of the lower one-third of the peer companies, although total cash compensation for our Named Executive Officers remains in the lower one-third of the peer group.  During fiscal 2011, there was no non-equity-based compensation paid to any Named Executive Officers.
 
For fiscal 2011, the actual non-equity-based incentive compensation and total cash compensation for each of the Named Executive Officers were as follows as compared to the peer group list:
 
Non-Equity-Based Incentive Compensation:
   
Actual (1)
 
Maximum
Chief Executive Officer
 
Bottom  45%
 
Bottom  38%
Chief Financial Officer
 
Bottom  48%
 
Bottom  38%
Vice Presidents
 
Bottom  46%
 
Bottom  32%

(1)
 
There was no non-equity-based incentive compensation paid for fiscal 2011 which was consistent with percentage of the peer group noted.
 
Total Cash Compensation:
   
Actual
 
Maximum
Chief Executive Officer
 
Bottom  7%
 
Bottom  14%
Chief Financial Officer
 
Bottom  3%
 
Bottom  14%
Vice Presidents
 
Bottom  11%
 
Bottom  18%

Equity-Based Compensation Program
Grants of equity awards have been the primary vehicles for offering long-term incentives to our executive officers.  The objectives of our equity-based compensation program are to advance our longer-term interests, complement incentives tied to annual performance and align the interests of employees more closely with those of our shareholders.  We believe that long-term incentives provided by equity-based awards are especially significant in motivating our executives and retaining their services. 

Each year, the Board of Directors, based on recommendations of the Compensation Committee, determines the number of shares that may be subject to equity awards for all employees, including the Named Executive Officers.  The total number of shares subject to equity awards is constrained by our Board’s desire to limit dilution to shareholders to a level consistent with our historical levels, which generally approximate a dilution of 1%, and furthermore to limit the total grant date fair value of the equity awards to a targeted level. The 1% dilution is based on an assessment of a conservative amount relative to high-tech growth companies.  The grant date fair value is based on a comparison to the prior years’ expense and the current year’s estimate of a percentage of total payroll expense.  We believe this level of dilution is low compared to other high-tech growth companies.  In recommending grants of equity awards, the Compensation Committee and Chief Executive Officer consider trends in equity-based compensation and whether they are consistent with our compensation philosophy.  They also consider our “overhang” percentage, that is, the number of our shares that is subject to outstanding options and other equity awards and that are available for the grant of options and other equity awards as a percentage of the number of our shares outstanding.  The Compensation Committee then determines the aggregate value or number of shares subject to all options and other equity awards to be granted to Named Executive Officers and other officers based on dilution or total expense, whichever is less.  The Compensation Committee also determines the mix of the type of equity grants.  In the past fiscal year, approximately 9% of all options and other equity awards granted to all of our employees were granted to the Named Executive Officers.  The allocation among Named Executive Officer is based on historical grants, the value of past grants and the Company’s performance, all being subject to the objectives listed under the section titled “Compensation Philosophy and Components.”  Generally we do not compare the number of shares subject to options and other equity awards granted to our executive officers to the peer group equivalent number.
 
16


The Chief Executive Officer determines the grants of options and other equity awards to other key employees within the limits set forth by the Compensation Committee, keeping in mind the factors described in the foregoing paragraph.  To facilitate the grant of stock options to employees and other executive officers, the Board of Directors authorized James B. Morgan to grant individual stock options and restricted stock units during fiscal 2011 to such employees and executive officers, subject to the guidelines and limitations imposed on him by the Compensation Committee.

During fiscal 2011, the Compensation Committee determined that it would continue to grant of restricted stock units as well as incentive stock options in a manner substantially similar to fiscal 2010, except that valuation of the equity grants, based on the grant date fair value, would be limited to approximately $2,500,000, which was the more conservative amount.  As a result, the actual number of stock options and restricted stock unites granted decreased from the prior year.  The value of the restricted stock units was equal to 50% of the value of the stock options as determined under the fair value provisions of ASC 718.

Grants of equity awards to executive officers are considered at the Board and Compensation Committee meetings generally held in November of each year.  Equity awards are not typically granted at other times of the year for employees, including new employees.  The exercise price of all stock options granted is equal to the fair market value of the Company’s common stock as reported on The NASDAQ Global Select Market on the date of grant, which is defined in the 2007 Plan as the closing price of the common stock as reported on The NASDAQ Global Select Market on the date of grant.  All options also contain five-year vesting provisions, with 20% of the shares underlying the stock option vesting each year following the date of grant.  The restricted stock units also contain a five-year vesting provisions, with 20% of the restricted stock units vesting each year following the date of grant.

Deferred Compensation Arrangements
We have deferred compensation arrangements to reward the Named Executive Officers who were employed by us as of August 1990, consisting of James B. Morgan and Aelred J. Kurtenbach.  The arrangements are designed to fund annual payments upon retirement based on the value of amounts credited to each person’s account.  The Compensation Committee administers these arrangements and approves on an annual basis the amounts credited to each participant’s account.  The amounts credited are equal to the interest earned on the account at a rate equal to the five-year United States Treasury Note rate as of the first day of each plan year.

Participation in this plan by other Named Executive Officers and key employees is not under consideration at this time by the Compensation Committee or the Board of Directors.  The purpose of the arrangement when it was implemented was to protect us from the loss of a key employee during our formative years in the early 1990s when the risk of loss was greater than it currently is.  These arrangements are funded through an increase in the cash surrender value of life insurance policies on the lives of the participants.  They are evidenced by deferred compensation agreements and are described in the table entitled “Non-qualified Deferred Compensation – Fiscal 2011”.

Vesting under the deferred compensation arrangements occurs upon reaching retirement age (defined as the earlier to occur of age 65 or age 55 and the completion of 20 years of service to the Company), or in the event of death or disability.  Participants may withdraw benefits in the plans that are vested after the employee ceases employment with the Company, but only if termination of employment is not for cause.  Upon a termination of employment for cause, the participant’s vested and non-vested interests in the plan are terminated.   Upon termination, other than for termination for cause, the participant may elect to receive benefits in the form of a lump sum payout or on an installment basis over a five- or ten-year period.  Upon a change in control, all benefits under the plan are payable unless a majority of the Board of Directors agrees to continue the plan.
 
17


Benefits
Our Named Executive Officers are eligible for all benefits generally available to our full-time permanent employees.  Other than the deferred compensation plan described above, we do not provide pension arrangements, post-retirement health coverage, or similar benefits for our executives or employees.  Any benefits that could be provided only to Named Executive Officers would be directly related to unique features of that executive’s position, such as being an expatriate, or when the executive officer undertakes actions at our request, such as relocating.  The benefits we provided in fiscal 2011 to executive officers consist of the Daktronics, Inc. 401(k) Plan and the Daktronics, Inc. Employee Stock Purchase Plan.

All employees, including the Named Executive Officers, are entitled to participate in the Daktronics, Inc. 401(k) Plan (the “401(k) Plan”), which is qualified under Section 401(k) of the Internal Revenue Code of 1986.  Each employee that is at least 21 years of age may, commencing on the first day of the month after which the employee has attained three months of service, elect to contribute to the 401(k) plan through payroll deductions of up to 100% of his or her salary, subject to certain limitations.  At the discretion of the Board of Directors, we may make matching contributions equal to a percentage of the salary deduction contributions or other discretionary amounts.  We paid $0.9 million in matching and discretionary contributions in fiscal 2011, $0.9 million in fiscal 2010 and $1.8 million in fiscal 2009. Contributions to the 401(k) Plan on behalf of the Named Executive Officers are described in the “Summary Compensation Table – Fiscal 2011.”

All employees, including the Named Executive Officers, are entitled to participate in the Daktronics, Inc. Employee Stock Purchase Plan (“ESPP”), which is intended to qualify under Section 423 of the Internal Revenue Code.  The ESPP allows employees to purchase shares of our common stock, subject to annual limitations, at a price equal to 85% of the lower of the fair market value of the common stock at the beginning or the end of each six-month offering period.  See “Executive Compensation – Employee Stock Purchase Plan”.

Accounting and Tax Treatment
We account for equity-based compensation paid to employees under ASC 718, Compensation-Stock Compensation promulgated by the Financial Accounting Standards Board, which requires us to estimate and record an expense over the service period of the award.  Thus, we may record an expense in one year for awards granted in earlier years.  Accounting rules also require us to record cash compensation as an expense at the time the obligation is accrued.

With respect to option awards, we generally can deduct the gain recognized by employees and Directors from non-qualified options.  However, to the extent that an option is an incentive stock option, we cannot deduct the gain recognized by the optionee if there is no disqualifying disposition by the optionee.  Furthermore, in the case of restricted stock and restricted stock units, we generally can deduct the fair market value of the shares vested on the vesting date.
 
With respect to restricted stock awards, we generally can deduct the gain recognized by employees and Directors as ordinary income.  This gain typically occurs upon vesting and is equal to the value of the stock on the vesting date.  Alternatively, if the recipient were to make an election under Section 83(b) of the Internal Revenue Code of 1986, we would be entitled to a deduction on the date of grant equal to the value of the restricted stock on the date of grant.
 
Section 162(m) of the Internal Revenue Code of 1986 generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to the companies’ chief executive officer and four other most highly-paid executive officers.  Qualifying performance-based compensation will not be subject to the deduction limitation if certain requirements are met.  Because the potential amount of base salary and non-equity-based incentive compensation that the executive officers can earn is less than $1 million, Section 162(m) has not been material to our compensation decisions.
 
C OMPENSATION COMMITTEE REPORT

Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings by reference, including this proxy statement, in whole or in part, the following report of the Compensation Committee shall not be deemed to be incorporated by reference into any such filings and shall not otherwise be deemed filed under such acts.
 
18

 
The Compensation Committee has reviewed and discussed the section of this proxy statement entitled “Compensation Discussion and Analysis” with management.  Based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

By the Compensation Committee:

Robert G. Dutcher, Chair
Nancy D. Frame
Byron J. Anderson

E XECUTIVE COMPENSATION

The following table sets forth information about compensation awarded to, earned by or paid to our principal executive officer and principal financial officer during the fiscal years ended April 30, 2011, May 1, 2010 and May 2, 2009 and to our three other most highly compensated Named Executive Officers whose total compensation was greater than $100,000 for the fiscal year ended April 30, 2011.

SUMMARY COMPENSATION TABLE – FISCAL 2011

 
 
Name and Principal Position
 
 
 
Year
 
 
 
Salary (1)
 
Stock
Awards (2)
 
Option
Awards (3)
 
Non-Equity
Incentive Plan
Compensation (4)
 
All Other
Compen-sation (5)
 
Total
James B. Morgan
 
2011
 
$
310,680
 
$
23,338
 
$
46,671
 
$
  -
 
$
5,600
 
$
386,289
Chief Executive Officer,
 
2010
   
310,680
   
19,011
   
41,424
   
-
   
6,156
   
377,271
    President and Director
 
2009
   
316,655
   
-
   
42,120
   
85,861
   
5,999
   
450,635
                                         
Dr. Aelred J. Kurtenbach
 
2011
 
$
150,000
 
$
-
 
$
-
 
$
-
 
$
2,769
 
$
152,769
Chairman of the Board and
 
2010
   
150,000
   
-
   
-
   
-
   
3,353
   
153,353
    Director
 
2009
   
152,885
   
-
   
-
   
16,582
   
5,694
   
175,161
                                         
William R. Retterath
 
2011
 
$
194,165
 
$
21,340
 
$
42,666
 
$
-
 
$
3,548
 
$
261,719
Chief Financial Officer
 
2010
   
192,780
   
17,427
   
37,972
   
-
   
2,421
   
250,600
   
2009
   
196,487
   
-
   
38,610
   
39,070
   
4,735
   
278,902
                                         
Bradley T. Wiemann
 
2011
 
$
178,546
 
$
20,308
 
$
40,649
 
$
-
 
$
3,927
 
$
243,430
Vice President
 
2010
   
177,000
   
16,635
   
36,246
   
-
   
4,348
   
234,229
   
2009
   
180,404
   
-
   
36,855
   
32,611
   
7,115
   
256,985
                                         
Reece A. Kurtenbach
 
2011
 
$
182,931
 
$
20,308
 
$
40,649
 
$
-
 
$
3,445
 
$
247,333
Vice President
 
2010
   
181,200
   
16,635
   
36,246
   
-
   
3,710
   
237,791
   
2009
   
184,685
   
-
   
36,855
   
33,385
   
6,128
   
261,053

(1)
The 2010 salary difference reflects one less week of payroll in fiscal year 2010 as compared to fiscal year 2009.
(2)
Consists of restricted stock units granted under the 2007 Plan.  The restricted stock units vest as to 20% of the shares one year after the date of grant and as to an additional 20% in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.  In accordance with ASC 718, the amount is calculated based on the fair value of the grant on the date of grant. Refer to “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates ” in our Annual Report on Form 10-K for the year ended April 30, 2011 for a discussion of the assumptions used in calculating the expense under ASC 718. 
(3)
Consists of stock options granted under the 2007 Plan.  The options vest and become exercisable as to 20% of the shares one year after the date of grant and as to an additional 20% in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.  The value of the option awards is based on the grant date fair value of the award in accordance with ASC 718.  Refer to “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates ” in our Annual Report on Form 10-K for the year ended April 30, 2011 for a discussion of the assumptions used in calculating the expense under ASC 718.
(4)
For fiscal year 2009, consists of cash bonuses earned for fiscal 2009 and paid in fiscal 2010.  The annual incentive bonus provides that our executive officers are eligible to earn annual cash bonuses tied to the level of achievement of net income compared to beginning stockholders’ equity.  See “Compensation Discussion and Analysis — Setting Executive Compensation — Annual Incentive Bonus.”
(5)
Consists of matching and discretionary contributions made by us under the 401(k) Plan, which is intended to qualify under Section 401(k) of the Internal Revenue Code of 1986 and contributions to a Health Savings Account beginning in fiscal 2011.
 
19

 
2007 Stock Incentive Plan
The 2007 Plan is intended to assist us in hiring and retaining well-qualified employees, consultants and other service providers by allowing them to participate in our ownership and growth through the grant of incentive and non-statutory stock options, restricted stock, restricted stock units and deferred stock.  All grants of equity compensation after August 15, 2007 have been made under the 2007 Plan.  We are no longer authorized to grant additional options or any other forms or equity compensation under prior plans, including the 2001 Daktronics Incentive Option Plan.  However, the outstanding options under the 2001 Incentive Option Plan as of August 15, 2007 were not affected by limits on authorization placed on it.  On June 27, 2011, options to purchase an aggregate of 1,484,528 shares were outstanding under the 2001 Incentive Option Plan and the 2007 Plan.
 
The following is a summary of the terms of the 2007 Plan, which is qualified by reference to the 2007 Plan.

Administration.   The 2007 Plan is administered by the Compensation Committee of the Board of Directors, which determines when and which employees, consultants and other service providers will be granted options and other awards under the 2007 Plan.  Subject to the provisions of the 2007 Plan, the Compensation Committee also determines the amount and terms of awards (including restrictions) and makes all other determinations necessary or advisable for the administration of the 2007 Plan. 

Employees of the Company and any of its affiliates are eligible for selection to receive options qualified as incentive stock options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 and restricted stock units.  Employees, consultants and other service providers of the Company or its affiliates may be granted non-qualified options (“NQOs”) under the 2007 Plan.

Shares Subject to 2007 Plan.   The 2007 Plan provides that the total number of shares of our common stock that could be purchased upon the exercise of options and other equity awards granted under the 2007 Plan cannot exceed 4,000,000 shares, subject to increase upon approval by the Company’s shareholders.  In the event of a stock dividend, stock split, reverse stock split, reclassification, combination, exchange of shares or other similar recapitalization of our common stock, there is an appropriate adjustment made, without the consent of any award recipient, to the number and kind of shares of our common stock subject to and reserved under the 2007 Plan, including any limits on shares established, the exercise or purchase price of each share subject to an award and any other affected terms of such awards.

Stock Options.   Upon the grant of an option under the 2007 Plan, the Compensation Committee fixes the number of shares of our common stock that the optionee may purchase upon exercise of the option and the exercise price at which the shares may be purchased.  With regard to ISOs, the exercise price cannot be less than the “fair market value” of the common stock at the time the ISO is granted or 110% of such fair market value in certain cases.  Further, the aggregate fair market value of common stock (determined at the time the ISO is granted) subject to ISOs granted to an employee under all of our option plans that became exercisable for the first time by such employee during any calendar year cannot exceed $100,000.  Under the 2007 Plan, the exercise price of non-qualified options cannot be less than fair market value.  Each option granted under the 2007 Plan is exercisable by the optionee only during the term fixed by the Compensation Committee, with such term ending not later than 10 years after the date of grant in the case of ISOs or five years after the date of grant in certain cases.  Payment for shares upon exercise of any option can be made in cash, in shares of our common stock that have been owned for more than six months having an aggregate fair market value on the date of exercise which is not less than the exercise price of the option, or by a combination of cash and such shares, as described in the 2007 Plan.

Options granted under the 2007 Plan are non-transferable except to the extent permitted by the agreement evidencing such option.  However, no ISO is transferable by any optionee other than by will or the laws of descent and distribution.  If, under the agreement evidencing any option, such option remains exercisable after the optionee’s death, it could be exercised to the extent permitted by such agreement by the personal representative of the optionee’s estate or by any person who acquired the right to exercise such option by bequest, inheritance or otherwise by reason of the optionee’s death.

Restricted Stock Units .   Grants of restricted stock units are fixed by the Compensation Committee.  The units vest as to 20% of the units one year after the date of grant and as to an additional 20% in each succeeding year, but only to the extent the grantee remains employed by us.  Restricted stock units are not transferrable.
 
20


The following table sets forth information regarding grants of plan-based awards to the Named Executive Officers during fiscal 2011:

GRANTS OF PLAN-BASED AWARDS — FISCAL 2011

             
All other
 
All other
         
             
stock
 
option
     
Grant
 
       
Estimated future payouts under
   
awards:
 
awards:
 
Exercise
 
date fair
 
       
non-equity incentive plan
   
number of
 
number of
 
or base
 
value of
 
       
awards (1)
   
shares of
 
securities
 
price of
 
stock and
 
             
stock or
 
underlying
 
option
 
option
 
   
Grant
       
units (#)
 
options (#)
 
awards
 
awards
 
Name
 
Date
 
Threshold
 
Target
 
Maximum
   
 (2)
 
 (3)
 
 (4)
 
(5)
 
James B. Morgan
 
12/02/10
 
$
58,253
 
$
194,175
 
$
194,175
   
1,810
 
8,215
 
$
14.37
 
$
70,009
 
Aelred J. Kurtenbach
 
12/02/10
   
11,250
   
37,500
   
37,500
   
-
 
-
   
-
   
-
 
William R. Retterath
 
12/02/10
   
27,003
   
90,008
   
90,008
   
1,655
 
7,510
   
14.37
   
64,005
 
Bradley T. Wiemann
 
12/02/10
   
22,628
   
75,425
   
75,425
   
1,575
 
7,155
   
14.37
   
60,957
 
Reece A. Kurtenbach
 
12/02/10
   
23,213
   
77,375
   
77,375
   
1,575
 
7,155
   
14.37
   
60,957
 

(1)
Consists of cash bonuses under our annual non-equity-based incentive compensation plan.  The amounts in these columns reflect the minimum payment level, if an award is achieved, the target payment level and the maximum payment level under the plan. For additional information concerning our annual non-equity-based compensation program, see the section of this proxy statement entitled “Compensation Discussion and Analysis.”
(2)
Consists of restricted stock units granted to the Named Executive Officers in fiscal 2011 under the 2007 Plan.  The units vest as to 20% of the shares one year after the date of grant and as to an additional 20% in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.
(3)
Consists of options granted to the Named Executive Officers in fiscal 2011 under the 2007 Plan.  The options vest and become exercisable as to 20% of the shares one year after the date of grant and as to an additional 20% in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.
(4)
The exercise price of all options was equal to the closing price of the common stock as quoted on The NASDAQ Global Select Market on the date of grant.
(5)
Represents the full grant date fair value determined pursuant to ASC 718 as reflected in our financial statements, based on the numbers of shares subject to option and restricted stock unit awards granted and the closing price of the common stock as quoted on The NASDAQ Global Select Market on the date of grant, which was $14.37 per share.
 
21

 
The following table sets forth information about unexercised options and restricted stock units that have not vested that were held at April 30, 2011 by the Named Executive Officers:

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END — FISCAL 2011

   
Option Awards (1)
 
Stock Awards
Name
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
 
 
 
 
Option
Exercise
Price ($)
 
Option
Expiration
Date
 
Number of Shares or
Units of
Stock that
Have Not Vested (#) (2)
 
Market Value
of Shares or
Units of Stock That Have Not Vested ($) (3)
James B. Morgan
 
20,000
 
-
   
8.8500
 
11/19/2013
         
   
16,000
 
-
   
12.8350
 
11/22/2014
         
   
14,000
 
-
   
13.5950
 
11/16/2015
         
   
8,800
 
2,200
   
34.0650
 
11/15/2016
         
   
6,600
 
4,400
   
20.0700
 
11/14/2017
         
   
4,800
 
7,200
   
8.2900
 
12/03/2018
         
   
2,400
 
9,600
   
8.6500
 
12/02/2019
         
   
-
 
8,215
   
14.3700
 
12/01/2020
         
                     
3,730
 
$
39,986
                             
Dr. Aelred J. Kurtenbach
 
8,000
 
-
   
3.7700
 
11/12/2011
         
 
William R. Retterath
 
20,000
 
-
   
8.8500
 
11/19/2013
         
   
14,000
 
-
   
12.8350
 
11/22/2014
         
   
14,000
 
-
   
13.5950
 
11/16/2015
         
   
8,000
 
2,000
   
34.0650
 
11/15/2016
         
   
6,000
 
4,000
   
20.0700
 
11/14/2017
         
   
4,400
 
6,600
   
8.2900
 
12/03/2018
         
   
2,200
 
8,800
   
8.6500
 
12/02/2019
         
   
-
 
7,510
   
14.3700
 
12/01/2020
         
                     
3,415
 
$
36,609
                             
Bradley T. Wiemann
 
14,000
 
-
   
5.7725
 
11/20/2012
         
   
12,000
 
-
   
8.8500
 
11/19/2013
         
   
10,000
 
-
   
12.8350
 
11/22/2014
         
   
10,000
 
-
   
13.5950
 
11/16/2015
         
   
5,600
 
1,400
   
34.0650
 
11/15/2016
         
   
5,400
 
3,600
   
20.0700
 
11/14/2017
         
   
4,200
 
6,300
   
8.2900
 
12/03/2018
         
   
2,100
 
8,400
   
8.6500
 
12/02/2019
         
   
-
 
7,155
   
14.3700
 
12/01/2020
         
                     
3,255
 
$
34,894
                             
Reece A. Kurtenbach
 
14,000
 
-
   
5.7725
 
11/20/2012
         
   
12,000
 
-
   
8.8500
 
11/19/2013
         
   
10,000
 
-
   
12.8350
 
11/22/2014
         
   
10,000
 
-
   
13.5950
 
11/16/2015
         
   
5,600
 
1,400
   
34.0650
 
11/15/2016
         
   
5,400
 
3,600
   
20.0700
 
11/14/2017
         
   
4,200
 
6,300
   
8.2900
 
12/03/2018
         
   
2,100
 
8,400
   
8.6500
 
12/02/2019
         
   
-
 
7,155
   
14.3700
 
12/01/2020
         
                     
3,255
 
$
34,894

(1)
Options vest and become exercisable as to 20% one year after date of grant and as to an additional 20% in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.
(2)
Restricted stock units vest as to 20% one year after date of grant and as to an additional 20% in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.
(3)
Determined by multiplying the Company’s closing stock price on the last business day of fiscal year 2011 by the number of shares subject to the award.
 
22


The following table sets forth information regarding the exercise of stock options during fiscal 2011 by the Named Executive Officers:

OPTION EXERCISES AND STOCK VESTED – FISCAL 2011

   
Option Awards
 
Stock Awards
   
Number of
     
Number of
   
   
Shares
 
Value
 
Shares
 
Number
   
Acquired on
 
Realized on
 
Acquired on
 
Realized on
Name
 
Exercise
 
Exercise (1)
 
Vesting
 
Vesting (2)
James. B. Morgan
 
20,000
 
$
207,950
 
480
 
$
7,018
Aelred J. Kurtenbach
 
22,504
   
136,417
 
-
   
-
William R. Retterath
 
20,000
   
224,750
 
440
   
6,433
Bradley T. Wiemann
 
46,000
   
253,189
 
420
   
6,140
Reece A. Kurtenbach
 
-
   
-
 
420
   
6,140

(1)
Consists of the difference between the closing price of our common stock on the date of exercise and the exercise price of the option multiplied by the number of shares acquired upon exercise.
(2)
Equals the number of shares vested times the market value of the stock as of the vesting date.

The following table sets forth information about our defined contribution plans for the Named Executive Officers subject to such plans for fiscal 2011:

NON-QUALIFIED DEFERRED COMPENSATION – FISCAL 2011

Name
 
Executive
Contributions
in Last
Fiscal Year
 
Registrant
Contributions
in Last Fiscal
Year
 
Aggregate
Earnings
in Last Fiscal
Year (1)
 
Aggregate
Withdrawals/
Distributions
 
Aggregate
Balance at
Last Fiscal
Year End
James B. Morgan
   
-
   
-
 
$
2,924
   
-
 
$
112,165
Dr. Aelred J. Kurtenbach
   
-
   
-
 
$
11,580
   
-
 
$
444,231

(1)
The amounts reported in this column are not included and are not required to be included in the Summary Compensation Table because the earnings reported do not constitute above-market or preferential earnings on compensation that is deferred within the meaning of Item 402(c)(2)(viii)(B) of Regulation S-K.
 
Employee Stock Purchase Plan
The Daktronics, Inc. Employee Stock Purchase Plan (the “ESPP”) permits eligible employees to make voluntary contributions through payroll deductions to be used to purchase our common stock.  The ESPP provides for periodic offerings, and each offering period is for six months (an “Offering Period”).  An employee may elect to have up to a maximum of 15% deducted from his or her regular salary for purposes of purchasing shares under the ESPP during each Offering Period.  The price at which the employee shares are purchased will be the lower of (i) 85% of the closing price of our common stock on the day that an Offering Period commences under the ESPP or (ii) 85% of the closing price of our common stock on the day that such Offering Period terminates.  With certain exceptions, employees are eligible to participate in the ESPP.  The ESPP provides for the issuance of up to 2,500,000 shares of common stock, and it is administered by the Board of Directors through the Compensation Committee.  Through April 30, 2011, 940,403 shares had been issued under the ESPP and, as of April 30, 2011, 1,559,597 shares were available for purchase under the ESPP.  During fiscal 2011, various Named Executive Officers participated in the ESPP, and the shares they hold through the ESPP are reflected in the table entitled “Security Ownership of Certain Beneficial Owners and Management”.

Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth certain information as of April 30, 2011 with respect to our equity compensation plans:
 
23

 
EQUITY COMPENSATION PLAN INFORMATION
 
Plan category
 
Number of Securities to
be Issued Upon Exercise of Outstanding Options,
Warrants and Rights
 
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
 
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
     
(a)
 
(b)
 
(c)
Equity compensation plans approved by
             
 
security holders:
             
 
2001 Incentive Stock Option Plan
 
1,432,898
 
$
15.37
 
-
 
2001 Outside Director Stock Option Plan
 
144,000
   
15.05
 
-
 
Employee Stock Purchase Plan (1)
 
Not Applicable
   
Not Applicable
   
 
2007 Stock Incentive Plan
 
1,665,917
   
12.71
 
2,048,544
Equity compensation plans not approved by
             
 
security holders
 
-
   
-
 
-
 
   Total
 
3,242,815
 
$
14.07
 
2,048,544

(1)
Under the ESPP, shares are acquired at the time of investment by the participating employees at the applicable discount.

Post-Employment Compensation

Potential Payments upon Termination of Employment or Change in Control
The table below reflects the compensation that would be paid to each of our Named Executive Officers in the event of termination of such executive’s employment. The amounts of compensation payable to each Named Executive Officer upon retirement are shown below.  The amounts shown assume that such termination was effective as of April 30, 2011, include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can be determined only at the time of such executive’s separation from the Company.  In addition, there may be re-negotiation of the payments upon any termination of employment or change in control.

Under the Option Plans and the 2007 Plan, all options and restricted stock units immediately vest upon a change in control as defined in the Option Plans and the 2007 Plan.  Upon a termination of employment for any reason, and consistent with our employment policies which apply to all employees, we are obligated to pay for accrued and unused vacation time, which would then be payable in a lump sum.
 
24


Name
 
Benefit
 
Termination
due to
change in control
 
Termination
without cause
or for good
reason
 
Termination
for cause
or for good
reason
 
Death
James B. Morgan
 
Stock option vesting acceleration (1)
 
$
768
 
$
-
 
$
-
 
$
-
   
Restricted stock vesting acceleration
   
20,088
   
-
   
-
   
-
   
Vacation pay
   
35,698
   
35,698
   
35,698
   
35,698
   
Non-qualified deferred compensation
   
112,165
   
112,165
   
112,165
   
112,165
       
$
168,719
 
$
147,863
 
$
147,863
 
$
147,863
                             
Dr. Aelred J. Kurtenbach
 
Vacation pay
 
$
28,846
 
$
28,846
 
$
28,846
 
$
28,846
   
Non-qualified deferred compensation
   
444,231
   
444,231
   
444,231
   
444,231
       
$
473,077
 
$
473,077
 
$
473,077
 
$
473,077
 
William R. Retterath
 
Stock option vesting acceleration (1)
 
$
704
 
$
-
 
$
-
 
$
-
   
Restricted stock vesting acceleration
   
18,414
   
-
   
-
   
-
   
Vacation pay
   
18,092
   
18,092
   
18,092
   
18,092
       
$
37,210
 
$
18,092
 
$
18,092
 
$
18,092
                             
Bradley T. Wiemann
 
Stock option vesting acceleration (1)
 
$
672
 
$
-
 
$
-
 
$
-
   
Restricted stock vesting acceleration
   
17,577
   
-
   
-
   
-
   
Vacation pay
   
20,423
   
20,423
   
20,423
   
20,423
       
$
38,672
 
$
20,423
 
$
20,423
 
$
20,423
                             
Reece A. Kurtenbach
 
Stock option vesting acceleration (1)
 
$
672
 
$
-
 
$
-
 
$
-
   
Restricted stock vesting acceleration
   
17,577
   
-
   
-
   
-
   
Vacation pay
   
15,792
   
15,792
   
15,792
   
15,792
       
$
34,041
 
$
15,792
 
$
15,792
 
$
15,792

(1)
For option awards, consists of the difference between the closing market price of the common stock as reported on The NASDAQ Global Select Market as of April 30, 2011 and the exercise price of the option multiplied by the number of shares subject to the option. 

Other Post-Employment Payments
We do not provide pension arrangements, post-retirement health coverage or non-qualified defined contribution plans.

Compensation Risk Analysis
The Compensation Committee has established the Officer Variable Compensation program to be based on the same company-wide measure for each executive.  The Committee has consistently selected Return On Equity as the company-wide measure since the beginning of the program.  Basing the program on the same company-wide measure for all the executives and year-to-year minimizes the risks associated with individual formulas based on individual actions.  The Officer Variable Compensation program is the only formula-based incentive-compensation program in the company.   

P ROPOSAL TWO
ADVISORY (NON-BINDING) VOTE ON THE COMPENSATION PAID
TO OUR NAMED EXECUTIVE OFFICERS
 
The foundation of our executive compensation program is to pay for performance. Base compensation for our executive officers is set relatively low against our peer groups, and a meaningful portion of the compensation to our executive officers is based on long-term equity incentive compensation and annual non-equity incentive compensation, which is focused on the key results and strategic drivers of our business. We believe that our executive compensation program aligns our incentive compensation with the long-term interests of our shareholders because it is designed to motivate our executives to deliver long-term sustainable growth and shareholder value and to provide retention incentives.
 
All of our Named Executive Officers are subject to at-will employment agreements. We do not maintain any supplemental executive retirement plans for our executive officers, and our Named Executive Officers participate in a retirement program that is open to all of our U.S. employees. We generally do not provide significant perquisites and other personal benefits.
 
We urge you to read the Compensation Discussion and Analysis section of this proxy statement for additional details on our executive compensation, including our compensation philosophy and objectives and the fiscal 2011 compensation of our Named Executive Officers. We believe that, viewed as a whole, our compensation practices and policies are appropriate and are fair to both the Company and its executives.
 
25

 
Proposal
The U.S. Congress has enacted requirements commonly referred to as the “Say on Pay” rules. As required by those rules, we are asking you to vote on the adoption of the following resolution:
 
BE IT RESOLVED by the shareholders of Daktronics, Inc., that the shareholders approve the compensation of the Company's Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K in the Company's proxy statement for the 2011 Annual Meeting.
 
Shareholder Approval
Proxies will be voted in favor of the resolution unless shareholders specify otherwise in their proxies and except for broker non-votes. The affirmative vote of at least a majority of the voting power of the shares present, in person or by proxy, and entitled to vote (excluding broker non-votes) is required for advisory approval of our executive compensation.  As an advisory vote, this proposal is non-binding. However, the Board and our Compensation Committee, which is responsible for designing and overseeing the administration of our executive compensation program, values the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for our Named Executive Officers.
 
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL TWO, THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE PROXY STATEMENT PURSUANT TO THE SEC’S COMPENSATION DISCLOSURE RULES.
 
P ROPOSAL THREE
ADVISORY (NON-BINDING) VOTE ON FREQUENCY OF SAY-ON-PAY VOTE
 
As required under the new rules adopted by the U.S. Congress and the SEC in connection with the say-on-pay vote described in Proposal Two above, our shareholders also will have an opportunity to cast an advisory, non-binding vote on how frequently future say-on-pay votes should be conducted by the Company. Shareholders may indicate whether they would prefer an advisory vote on executive compensation every one, two or three years. We are required to solicit shareholder votes on the frequency of future say-on-pay proposals at least once every six years, although we may seek shareholder input more frequently.
 
We have given significant thought to our recommendation with respect to the frequency of the voting on say-on-pay by our shareholders. We have determined that a vote once every three years is preferable. This determination is based on our conclusions that our overall compensation practices are conservative, do not include practices that could lead to excessively high compensation levels, are generally consistent with our approaches for all employees, and finally, over the years have not and are not expected to change materially.  These conclusions are supported more completely in the section entitled “Compensation Discussion and Analysis.”  The frequency selected by the shareholders for conducting say-on-pay voting at the annual meetings of the shareholders of the Company is not a binding determination. However, the frequency selected will be given due consideration by our Compensation Committee in its discretion. 

Shareholder Approval
The proxy card provides shareholders with the opportunity to choose among four alternatives (holding the say-on-pay advisory vote once every one, two or three years, or abstaining from voting on this item). As a result, shareholders will not be voting to approve or disapprove the recommendation of the Board of Directors.
 
Proxies will be voted for the alternative of once every three years unless our shareholders specify otherwise in their proxies. The voting alternative, if any, that receives the affirmative vote of a plurality of the voting power present (in person or by proxy) at the Annual Meeting and entitled to vote on this item of business will be the alternative adopted by the shareholders in accordance with the voting standard established by Daktronics’ bylaws. However, the results of this vote are not binding on the Board, whether or not any alternative is passed under this voting standard. In evaluating the vote on this advisory resolution, the Board will consider the voting results in their entirety.
 
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE OPTION OF ONCE EVERY THREE YEARS AS THE PREFERRED FREQUENCY FOR ADVISORY SAY-ON-PAY VOTES ON EXECUTIVE COMPENSATION AS SET FORTH IN PROPOSAL THREE.
 
26


P ROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
 PUBLIC ACCOUNTING FIRM
 
The Audit Committee of the Board of Directors has appointed Ernst & Young LLP as our independent registered public accounting firm to audit our consolidated financial statements for fiscal 2012 and recommends that the shareholders vote for ratification of such appointment.
 
Ernst & Young LLP has audited our financial statements since fiscal year 2003. A representative of Ernst & Young LLP is expected to be present at the Annual Meeting, will have the opportunity to make a statement, and is expected to be available to respond to appropriate questions.
 
Audit and Other Professional Fees
The aggregate fees billed for professional services rendered by Ernst & Young LLP for the audit of our annual financial statements for the last two fiscal years and fees billed for other services rendered by Ernst & Young LLP related to those years are set forth in the following table:
 
   
Fiscal Year Ended
   
April 30, 2011
 
May 1, 2010
Audit fees (1)
 
$
430,912
 
$
497,429
Audit-related fees (2)
   
21,685
   
22,000
Tax fees (3)
   
-
   
-
All other fees (4)
   
1,995
   
3,000
Totals
 
$
454,592
 
$
522,429

(1)
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements, the audit of our internal control over financial reporting, the reviews of the interim financial statements included in our Quarterly Reports on Form 10-Q and other professional services provided in connection with statutory and regulatory filings or engagements. 
(2)
Audit-related fees are fees for assurance and related services performed by Ernst & Young LLP that are reasonably related to the performance of the audit or review of the Company’s financial statements.
(3)
Tax fees are fees for professional services performed by Ernst & Young LLP with respect to tax compliance, tax advice and tax planning.  This includes preparation of original and amended tax returns for us, any refund claims, payment planning, tax audit assistance, tax advice related to mergers and acquisitions, and tax work stemming from audit-related items.
(4)
All other fees are fees for other permissible work performed by Ernst & Young LLP that does not meet the above category descriptions.

As provided in the Audit Committee’s charter, all engagements for any non-audit services by our independent registered public accounting firm must be approved by the Audit Committee before the commencement of any such services.  The Audit Committee may designate a member or members of the Audit Committee to represent the entire Audit Committee for purposes of approving non-audit services, subject to review by the full Audit Committee at the next regularly scheduled meeting.

The Audit Committee considers the provision of services by Ernst & Young LLP to us, over and above the external audit fees, to be compatible with the ability of Ernst & Young LLP to maintain its independence.

Shareholder Approval
The affirmative vote of a majority of the shares of our common stock represented at the Annual Meeting, either in person or by proxy, assuming a quorum is present, is required to ratify the appointment by the Audit Committee of the Board of Directors of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 28, 2012.  If the shareholders do not approve the selection of Ernst & Young LLP, the Audit Committee will reconsider its selection.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING APRIL 28, 2012 AS SET FORTH IN PROPOSAL FOUR.
 
27

 
A UDIT COMMITTEE REPORT
 
Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings by reference, including this proxy statement, in whole or in part, the following report of the Audit Committee shall not be deemed to be incorporated by reference into any such filings and shall not otherwise be deemed filed under such acts.
 
The Audit Committee is responsible for reviewing our financial reporting process, systems of internal controls, the audit process and compliance with laws and regulations.  Management has the responsibility for the financial statements and the reporting process, including the systems of internal controls, which it reviews with the Audit Committee.  In this context, the Audit Committee has met and held discussions with management and our independent registered public accounting firm. The Audit Committee also has the authority and responsibility to select, evaluate and, when it deems it to be appropriate, replace the independent registered public accounting firm.  The Audit Committee is also responsible for overseeing the Company’s Policy and Procedures with Respect to Related Person Transactions.
 
The Audit Committee has established procedures for the receipt, retention and treatment of complaints received by us regarding accounting controls or auditing matters and the confidential, anonymous submission by our employees of any accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of any concerns regarding questionable accounting or auditing matters.  The Audit Committee operates under a formal written charter that has been adopted by the Board of Directors and is available on the Company’s website at http://www.daktronics.com .
 
The Audit Committee is composed of three Directors who are independent as provided in Rule 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Exchange Act.  The members of the Audit Committee are appointed annually by the Board of Directors.  During fiscal 2011, John L. Mulligan and James A. Vellenga served as members of the Audit Committee for the entire year, Nancy D. Frame served as a member of the Audit Committee through February 2011, and effective February 2011, Bruce W. Tobin replaced Ms. Frame on the Audit Committee.  The Audit Committee members are not professional accountants or auditors, and their role is not intended to duplicate or certify the activities of our management and our independent registered public accounting firm, nor can the Audit Committee certify that the independent registered public accounting firm is “independent” under applicable rules.  The Audit Committee serves a Board-level oversight role in which it provides advice, counsel and direction to management and the independent registered public accounting firm on the basis of the information it receives, discussions with management and the independent registered public accounting firm, and the experience of the Audit Committee’s members in business, financial and accounting matters.
 
The Audit Committee has reviewed and discussed with management our audited financial statements for the fiscal year ended April 30, 2011; discussed with management significant accounting policies applied by us in our financial statements, as well as alternative treatments; reviewed and discussed our policies with respect to risk assessment; discussed with our independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 61,   as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; discussed with our independent registered public accounting firm its respective audits and assessments, including internal control testing under Section 404 of the Sarbanes-Oxley Act of 2002; received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence; discussed with the independent registered public accounting firm the firm’s independence; reviewed and pre-approved fees charged by the independent registered public accounting firm and considered whether the independent registered public accounting firm’s provision of non-audit services to us is compatible with the auditor’s independence.  The Audit Committee also met in executive session following each of the formal Audit Committee meetings with representatives of our independent registered public accounting firm.
 
The Committee has concluded that the independent registered public accounting firm is independent from the Company and its management.  The Committee discussed with our independent registered public accounting firm the overall scope and plans for its audits.  The Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examinations, the evaluations of our internal controls, and the overall quality of our financial reporting.
 
Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that our audited financial statements for the fiscal year ended April 30, 2011 be included in our Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
 
By the Audit Committee:
 
John L. Mulligan, Chair
Bruce W. Tobin
James A. Vellenga
 
28


H OUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS

We have adopted a procedure called “householding,” which has been approved by the SEC.  Under this procedure, we are delivering only one copy of our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials to multiple shareholders who have requested paper copies of the Annual Report and Proxy Statement who share the same address, unless we have received contrary instructions from one or more of the shareholders.  Shareholders who participate in householding will continue to be able to access and receive separate proxy cards or voting instruction cards.  In addition, some banks, brokers and other intermediaries may be participating in this practice of “householding” our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials. This practice benefits us and our shareholders because it reduces the volume of duplicate information received at a shareholder’s house and helps reduce our expenses.
 
Shareholders that have previously received a single set of our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials may request their own copies this fiscal year or in future years by contacting their bank, broker or other nominee record holder. We will also deliver separate paper copies of our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials to any shareholder upon written request sent to Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006, Attention: Investor Relations, or upon verbal request by calling (605) 692-0200.

A VAILABLE INFORMATION
 
The Annual Report to Shareholders for the fiscal year ended April 30, 2011, including financial statements, is being mailed with this Proxy Statement.  The Annual Report to Shareholders is not incorporated in this Proxy Statement and is not deemed to be a part of this Proxy Statement.

Any person whose proxy is solicited by this Proxy Statement will be provided, upon request and without charge, with a copy of our Annual Report on Form 10-K for the fiscal year ended April 30, 2011.  Please submit such requests to Daktronics, Inc.,  201 Daktronics Drive, Brookings, South Dakota 57006, Attention:  Investor Relations, or by calling (605) 692-0200.
 
By Order of the Board of Directors,

Carla S. Gatzke
Corporate Secretary

29


PROXY BALLOT
 

 
PROXY BALLOT 2