2014 Regal-Beloit Proxy

Setting Executive Compensation What is the role of the Board in setting NEOs’ compensation?

The Board’s primary roles in setting our executive compensation are:

! to annually review and consider our compensation philosophy;

! to appoint the members of the Committee; and

! to review and approve certain recommendations of the Committee relating to compensation. The Committee consists entirely of independent directors who are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code and “non‐employee directors” for purposes of the Securities Exchange Act of 1934. The current members of the Committee are Messrs. Doerr (Chairman), Burt and Foate. What is the role of the Committee in setting NEOs’ compensation? The Committee is responsible for determining the components of our executive compensation program, consistent with the compensation philosophy determined by our Board, and the executive compensation packages offered to our NEOs. The Committee determines executive salaries, administers our SVA Cash Incentive Plan and administers our long‐term equity incentive plans and makes awards under the plans. The Committee reviews data from market surveys and proxy statements from our established peer group and retains an independent compensation consultant to assess our competitive position with respect to total executive compensation. The Committee takes various factors into account in setting compensation levels and does not use a formulaic approach, but generally seeks to closely align target total direct compensation (i.e., the sum of base salary, target SVA opportunity, and target long‐term incentives) with the peer group and survey median. What is the role of the CEO in setting NEOs’ compensation? In its decision‐making process, the Committee receives and considers the recommendations of our CEO with respect to compensation to be paid to our executive officers other than himself. Our CEO makes no recommendation with respect to his own compensation. Does the Committee use an independent compensation consultant to help in setting NEOs’ compensation? Yes. The Committee periodically solicits proposals from independent compensation consultants to assist the Committee in the performance of its responsibilities. As part of its evaluation of potential compensation consultants, the Committee considers all factors relevant to the consultant’s independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing standards. After selecting an independent compensation consultant, the

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