Edgar Filing: FLOWSERVE CORP

Definitive Proxy Statement

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

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FLOWSERVE CORPORATION
(Name of Registrant as Specified In Its Charter)


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

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		FLOWSERVE CORPORATION

5215 N. O’Connor Blvd., Suite 2300

Irving, Texas 75039

April 5, 2012

NOTICE OF 2012 ANNUAL MEETING OF SHAREHOLDERS

The 2012 Annual Meeting of Shareholders (the “Annual Meeting”) of Flowserve Corporation (the “Company”) will be held on Thursday, May 17, 2012 at 11:30 a.m., local time, at the Flowserve Corporation Global Technology and Training Center, which is located at 4343 West Royal Lane, Irving, Texas 75063. Directions to the Annual Meeting and a map of the area are included in the proxy materials on the inside back cover and are also available online at www.proxyvote.com.

Shareholders of record of the Company’s common stock, par value $1.25 per share, at the close of business on March 23, 2012 are entitled to notice of and to vote at the Annual Meeting.

At the Annual Meeting, the Company will ask you to:

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elect four directors, each to serve a term expiring at the 2015 annual meeting of shareholders;

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provide an advisory vote to approve the Company’s executive compensation;

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approve an amendment to the Company’s Restated Certificate of Incorporation to remove the classified structure of our Board of Directors and provide for the annual election of all directors with expiring or newly elected terms beginning in 2013;

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approve an amendment to the Company’s Restated Certificate of Incorporation to provide shareholders who have continuously held at least 25% of the Company’s outstanding common stock for at least one year the right to call a special meeting of shareholders;

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ratify the appointment of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for 2012; and

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attend to other business properly presented at the Annual Meeting or any adjournments or postponements thereof.

The enclosed proxy statement contains other important information that you should read and consider before you vote.

In accordance with Securities and Exchange Commission rules, we are furnishing proxy materials to our shareholders on the Internet, rather than by mail. We believe this e-proxy process expedites our shareholders’ receipt of proxy materials, lowers our costs and reduces the environmental impact of our Annual Meeting. The proxy statement and annual report to shareholders and any other proxy materials are available on our hosted website at www.proxyvote.com. For additional related information, please refer to the “Important Notice of Electronic Availability of Materials for the Shareholder Meeting to be held on May 17, 2012” in the enclosed proxy statement.

Your vote is important, and whether or not you plan to attend the Annual Meeting, your prompt cooperation in voting is greatly appreciated. We encourage you to vote via the Internet. It is convenient and saves us significant postage and processing costs. You may also vote via telephone or by mail if you received paper copies of the proxy materials. Instructions regarding all three methods of voting are included in the Notice of Internet Availability of Proxy Materials, the proxy card and the proxy statement.

Thank you in advance for voting and for your support of the Company.

By Order of the Board of Directors,

LOGO

Carey A. O’Connor

Vice President and Corporate Secretary

TABLE OF CONTENTS


Solicitation			1
Voting			2
Shareholder Proposals and Nominations			4
Proposal One: Election of Directors			5
Required Vote and Recommendation			5
Board of Directors			6
Biographical Information			6
Nominees to Serve a Term Expiring at the 2015 Annual Meeting of Shareholders			6
Directors Serving a Term Expiring at the 2014 Annual Meeting of Shareholders			7
Directors Serving a Term Expiring at the 2013 Annual Meeting of Shareholders			9
Role of the Board; Corporate Governance Matters			10
Board Leadership Structure and Risk Oversight			11
Meetings of the Board			11
Shareholder Communications with the Board			12
Committees of the Board			12
Audit Committee			12
Finance Committee			12
Corporate Governance and Nominating Committee			13
Organization and Compensation Committee			14
Compensation Committee Interlocks and Insider Participation			14
Board of Directors Compensation			15
Executive Officers			16
Executive Compensation			17
Compensation Discussion and Analysis			17
Executive Summary			17
Oversight of the Executive Compensation Program			19
Executive Compensation Program Objectives and Principles			20
Elements of the Executive Compensation Program			23
Additional Executive Compensation Information			33
Annual Executive Compensation Program Review and Compensation Risk			34
Organization and Compensation Committee Report			36
Summary Compensation Table			37
2011 Grants of Plan-Based Awards			39
Outstanding Equity Awards at Year-End 2011			40
2011 Option Exercises and Stock Vested			41
2011 Pension Benefits			42
2011 Non-Qualified Deferred Compensation			43
Potential Payments Upon Termination or Change-in-Control			43
Flowserve Corporation Officer Severance Plan			43
Flowserve Corporation Executive Officer Change-in-Control Severance Plan			44
Quantification of Potential Payments			46
Proposal Two: Advisory Vote on Executive Compensation			49
Required Vote and Recommendation			50
Certain Relationships and Related Transactions			51
Security Ownership of Directors and Certain Executive Officers			52
Security Ownership of Certain Beneficial Owners			53
Equity Compensation Plan Information			54
Section 16(a) Beneficial Ownership Reporting Compliance			54
Proposal Three: Elimination of the Classified Structure of the Board of Directors			54
Required Vote and Recommendation			55


Proposal Four: Shareholder Right to Call a Special Meeting of Shareholders			55
Required Vote and Recommendation			56
Proposal Five: Ratification of Appointment of PricewaterhouseCoopers LLC to Serve as Our Independent Registered Public Accounting Firm for 2012			56
Required Vote and Recommendation			57
Report of the Audit Committee			57
Other Audit Information			58
Other Matters			58
Annex A			A-1
Annex B			B-1
Annex C			C-1
Map and Driving Directions to the Flowserve Corporation Global Technology and Training Center

LOGO

FLOWSERVE CORPORATION

5215 N. O’Connor Blvd., Suite 2300, Irving, Texas 75039

Proxy Statement For The

2012 Annual Meeting of Shareholders

Solicitation

We are providing these proxy materials in connection with the solicitation by the Board of Directors (the “Board”) of Flowserve Corporation, a New York corporation (the “Company”), of proxies to be voted at the 2012 Annual Meeting of Shareholders (the “Annual Meeting”), which will be held on Thursday, May 17, 2012, and at any adjournments or postponements of this scheduled meeting. The use of “we,” “us” or “our” in this proxy statement refers to the Company.

IMPORTANT NOTICE OF ELECTRONIC AVAILABILITY OF MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 17, 2012

Pursuant to Securities and Exchange Commission (“SEC”) rules, we may furnish proxy materials, including this proxy statement and the Company’s annual report for the year ending December 31, 2011, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them. Instead, a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), which was mailed to most of our shareholders, will explain how you may access and review the proxy materials and how you may submit your proxy on the Internet. If you would like to receive a paper or electronic copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability. Shareholders who requested paper copies of proxy materials or previously elected to receive proxy materials electronically did not receive the Notice of Internet Availability and are receiving the proxy materials in the format requested.

This proxy statement and the Company’s annual report for the year ending December 31, 2011 are available electronically on our hosted website at www.proxyvote.com.

To access and review the materials made available electronically:

Go to www.proxyvote.com and input the 12-digit control number from the Notice of Internet Availability or proxy card.

Click the “2012 Proxy Statement” in the right column.

Have your proxy card or voting instructions available.

We encourage you to review all of the important information contained in the proxy materials before voting. If you would like to attend the Annual Meeting in person, please refer to the inside back cover of this proxy statement or www.proxyvote.com for directions to the meeting.

The Notice of Internet Availability and the proxy materials are first being made available to our shareholders on or about April 5, 2012.

Cost of Proxy Solicitation

The solicitation of proxies is made by our Board and will be conducted primarily by mail. Brokerage firms and other custodians, nominees and fiduciaries are reimbursed by the Company for reasonable out-of-pocket expenses that they incur

to send proxy materials to shareholders and solicit their votes. In addition to this mailing, proxies may be solicited, without extra compensation, by our officers and employees, by mail, telephone, facsimile, electronic mail and other methods of communication. The Company bears the full cost of soliciting proxies. The Company has also retained Alliance Advisors to aid in the solicitation of proxies by mail, telephone, facsimile, e-mail and personal solicitation and will request brokerage houses and other nominees, fiduciaries and custodians to forward soliciting materials to beneficial owners of the Company’s common stock, par value $1.25 per share (“common stock”). For these services, the Company will pay Alliance Advisors a fee of $7,000 plus reimbursement for reasonable out-of-pocket expenses.

Shareholders Sharing an Address

To reduce the expenses of delivering duplicate proxy materials, we deliver one Notice of Internet Availability and, if applicable, annual report and proxy statement, to multiple shareholders sharing the same mailing address unless otherwise requested. We will promptly send a separate annual report and proxy statement to a shareholder at a shared address upon request at no cost. Shareholders with a shared address may also request that we send a single copy in the future if we are currently sending multiple copies to the same address. Requests related to delivery of proxy materials may be made by calling Investor Relations at (972) 443-6500 or writing to Flowserve Corporation, Attention: Investor Relations, 5215 N. O’Connor Blvd., Suite 2300, Irving, Texas 75039. Shareholders who hold shares in “street name” (as described below) may contact their brokerage firm, bank, broker-dealer or similar organization to request information about this “householding” procedure.

Voting

Who May Vote and Number of Votes

If you are a shareholder of record at the close of business on March 23, 2012 (the “Record Date”), you may vote on the matters proposed in this proxy statement. You have one vote for each share you own.

Quorum for the Meeting

A majority of the outstanding shares of common stock entitled to vote at the Annual Meeting and represented in person or by proxy constitutes a quorum. A quorum is necessary to conduct business at the Annual Meeting. You are part of the quorum if you have voted. Shares that the holder abstains from voting on a particular proposal are counted as present at the meeting for purposes of determining a quorum.

Broker non-votes are also counted as present for purposes of determining a quorum. A “broker non-vote” occurs when a broker holding shares in “street name” for a beneficial owner is represented in person or by proxy at the meeting but does not vote on a particular proposal because the broker has not received voting instructions from the beneficial owner and cannot or chooses not to vote the shares in its discretion for that particular proposal.

Counting of Votes

The voting standards required to elect directors and approve the other proposals, as well as the treatment of abstentions and broker non-votes, are described with each proposal under the respective “Required Vote and Recommendation” heading.

Only “votes cast” count in the voting results, and withheld votes are not considered votes cast. If your shares are held through a broker, your vote instructs the broker how you want your shares to be voted. If you vote on each proposal, your shares will be voted in accordance with your instructions. Under the rules of the New York Stock Exchange (“NYSE”), brokers may vote shares they hold in “street name” on behalf of beneficial owners who have not voted with respect to certain discretionary matters. The proposal to ratify the appointment of PricewaterhouseCoopers LLP (Proposal Five) is considered a discretionary matter, so brokers may vote shares on this matter in their discretion if no voting instructions are received. However, the election of directors (Proposal One), the advisory vote on executive compensation (Proposal Two), and the proposals to amend our Restated Certificate of Incorporation (Proposals Three and Four) are NOT considered discretionary matters, so brokers have no discretion to vote shares for which no voting instructions are received, and no vote will be cast if you do not vote on those items. We therefore urge you to vote on ALL voting items.

The advisory vote on executive compensation is non-binding, meaning that our Board will not be obligated to take any compensation actions, or to adjust our executive compensation programs or policies, as a result of the vote. Notwithstanding the advisory nature of the vote, the resolution will be considered passed with the affirmative vote of a majority of the votes present at the Annual Meeting.

There are no dissenters’ rights of appraisal with respect to the matters to be acted upon at the meeting.

At the close of business on the Record Date, 54,658,763 shares of common stock were issued and outstanding (excluding treasury shares) that may be voted at the Annual Meeting.

How to Vote

Voting by Proxy Holder for Shares Registered in the Name of a Brokerage Firm or Bank. If your shares are held by a broker, bank or other nominee (i.e., in “street name”), you will receive instructions from your nominee, which you must follow in order to have your shares voted. “Street name” shareholders who wish to vote at the meeting will need to obtain a proxy from the broker, bank or other nominee that holds their shares to confirm their shareholder status for entry into the Annual Meeting.

Voting by Proxy Holder for Shares Registered Directly in the Name of Shareholder. If you hold your shares in your own name as a holder of record, you must vote your shares in person at the Annual Meeting or instruct the proxy holders named on the proxy card how to vote your shares by either (i) using the Internet website or the toll-free telephone number set forth below or (ii) if you received paper copies of the proxy materials, signing, dating and mailing the enclosed proxy card to our independent proxy tabulation firm, Broadridge Investor Communications Services (“Broadridge”), in the enclosed envelope. Each of these voting methods is described below:

Vote by Internet. You have the option to vote via the Internet at the address of www.proxyvote.com by following the on-screen instructions that will direct you how to vote your shares. Internet voting is available 24 hours a day, 7 days a week, until 11:59 p.m., Eastern Time, on May 16, 2012. If you hold shares in the Flowserve Corporation Retirement Savings Plan, your Internet vote must be received by 11:59 p.m., Eastern Time, on May 15, 2012. Have your proxy card available when you access the Internet website. IF YOU VOTE BY INTERNET, YOU DO NOT NEED TO RETURN A PROXY CARD.

Vote by Telephone. If you hold your shares in your name as a holder of record, you may vote by telephone by calling toll-free to 1-800-690-6903 from the United States and Canada and following the series of voice instructions that will direct you how to vote your shares. Have your proxy card available when you place your telephone call. Telephone voting is available 24 hours a day, 7 days a week, until 11:59 p.m., Eastern Time, on May 16, 2012. If you hold shares in the Flowserve Corporation Retirement Savings Plan, your telephone vote must be received by 11:59 p.m., Eastern Time, on May 15, 2012. IF YOU VOTE BY TELEPHONE, YOU DO NOT NEED TO RETURN A PROXY CARD.

Vote by Mail. If you received paper copies of the proxy materials, you may mark the enclosed proxy card, sign and date it and return it to Broadridge in the enclosed envelope as soon as possible before the Annual Meeting. Your signed proxy card must be received by Broadridge prior to the date of the Annual Meeting for your vote to be counted at the Annual Meeting.

Vote in Person. If you are a registered shareholder and attend the Annual Meeting in person, you may deliver a completed proxy card or vote by ballot at the Annual Meeting.

Voting by Participants in the Flowserve Corporation Retirement Savings Plan

If you are a participant in the Flowserve Corporation Retirement Savings Plan, your vote serves as a voting instruction to the trustee for this plan.

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To be timely, if you vote your shares in the Flowserve Corporation Retirement Savings Plan by telephone or Internet, your vote must be received by 11:59 p.m., Eastern Time, on May 15, 2012. If you do not vote by telephone or Internet, please return your proxy card as soon as possible.

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If you vote in a timely manner, the trustee will vote the shares as you have directed.

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If you do not vote, or if you do not vote in a timely manner, the trustee will vote your shares in the same proportion as the shares voted by participants who timely return their cards to the trustee.

Changing Your Vote

You may revoke your proxy at any time before it has been exercised at the Annual Meeting by:

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timely mailing in a revised proxy dated later than the prior submitted proxy;

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timely notifying the Corporate Secretary in writing that you are revoking your proxy;

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timely casting a new vote by telephone or the Internet; or

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if you are a holder of record, appearing in person and voting by ballot at the Annual Meeting.

Vote Tabulations

Tabulation of voted proxies will be handled by Broadridge, an independent firm. Broadridge is the inspector of elections for the Annual Meeting.

Shareholder Proposals and Nominations

Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), certain shareholder proposals may be eligible for inclusion in our 2013 proxy statement. These shareholder proposals must comply with the requirements of Rule 14a-8, including a requirement that shareholder proposals be received by the Corporate Secretary no later than December 6, 2012. We strongly encourage any shareholder interested in submitting a proposal to contact the Corporate Secretary in advance of this deadline to discuss the proposal. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement. The Corporate Governance and Nominating Committee reviews all shareholder proposals and makes recommendations to the Board for action on such proposals.

Alternatively, under the Company’s By-laws, if a shareholder does not want to submit a proposal for inclusion in our proxy statement but wants to introduce it at our 2013 annual meeting, or intends to nominate a person for election to the Board directly (rather than by recommending such person as a candidate to our Corporate Governance and Nominating Committee as described below under “Board of Directors—Committees of the Board—Corporate Governance and Nominating Committee”), the shareholder must submit the proposal or nomination in writing between January 17, 2013 and February 16, 2013. If, however, the 2013 annual meeting is held more than 30 days before or more than 60 days after the anniversary of the 2012 Annual Meeting, the shareholder must submit any such proposal between (i) 120 calendar days prior to the 2013 annual meeting and (ii) the later of 90 calendar days prior to the 2013 annual meeting or 10 days following the date on which the date of the 2013 annual meeting is publicly announced. The shareholder’s submission must be made by a registered shareholder on his or her behalf or on behalf of a beneficial owner of the shares, and must include detailed information specified in our By-laws concerning the proposal or nominee, as the case may be, and detailed information as to the shareholder’s interests in Company securities. We will not entertain any proposals or nominations at the 2013 annual meeting that do not meet these requirements.

If the shareholder does not comply with the requirements of Rule 14a-4(c)(1) under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such shareholder proposal or nomination. The Company’s By-laws are posted on our website at www.flowserve.com under the “Investor Relations—Governance” caption. To make a submission or to request a copy of the Company’s By-laws, shareholders should contact our Corporate Secretary at the following address:

Flowserve Corporation

5215 N. O’Connor Blvd., Suite 2300

Irving, Texas 75039

Attention: Corporate Secretary

We strongly encourage shareholders to seek advice from knowledgeable legal counsel and contact the Corporate Secretary before submitting a proposal or a nomination.

Proposal One: Election of Directors

The Company’s Board currently consists of eleven directors. There are currently three classes of directors with a minimum of three members per class, and the members of each class hold office until the third succeeding annual meeting of shareholders after which they were elected. The Board has nominated Mark A. Blinn, Roger L. Fix, David E. Roberts and James O. Rollans, whose terms of office as members of the Board are expiring at the 2012 Annual Meeting, to serve a new term that will expire at the 2015 annual meeting of shareholders. Biographical information regarding each of the nominees is provided below under the headings “Board of Directors—Biographical Information—Nominees to Serve a Term Expiring at the 2015 Annual Meeting of Shareholders.”

As described in detail under “Proposal Three—Elimination of the Classified Structure of the Board of Directors”, the Company is submitting a proposal for shareholder approval at this Annual Meeting that, if approved, would amend the Company’s governing documents to eliminate the classified structure of the Board. If Proposal Three is approved by our shareholders, the annual election of Board members with expiring terms would commence with the 2013 annual meeting of shareholders, and the current terms of previously-elected directors (including those directors under this Proposal One) would not be affected. As such, the outcome of the vote on Proposal Three will not impact the election of directors under this Proposal One at this Annual Meeting.

Required Vote and Recommendation

Our By-laws require that, in an uncontested election, each director will be elected by a vote of the majority of the votes cast. A majority of votes cast means that the number of shares cast “for” a director’s election exceeds the number of votes cast “against” that director. We will not treat any share as having cast a vote on this proposal (a) where the ballot is marked as withheld, (b) if it is otherwise present at the Annual Meeting but there is an abstention or (c) where a shareholder gives no authority or direction. In a contested election, the directors will be elected by a plurality of the votes cast, meaning the directors receiving the largest number of “for” votes will be elected to the open positions.

In an uncontested election, any nominee for director who duly holds office as a director under the By-Laws and does not receive an affirmative vote of a majority of the votes cast in favor of or against such nominee is required to tender his or her resignation promptly after such election. The independent directors of the Board, giving due consideration to the best interests of the Company and our shareholders, will then evaluate the relevant facts and circumstances and make a decision, within 30 days after the election, on whether to accept the tendered resignation. Any director whose resignation is under consideration is prohibited from participating in the Board’s decision. The Board will promptly disclose publicly its decision and, if applicable, the reasons for rejecting the tendered resignation. The Board may fill any vacancy resulting from a director’s accepted resignation, as provided in our By-laws.

Broker non-votes will not be considered to have voted on this proposal and will therefore have no effect on the proposal.

The individuals named as proxies on the enclosed proxy card will vote your proxy “FOR” the election of these nominees unless you instruct otherwise or you withhold authority to vote for any one or more of them. If any director is unable to stand for re-election, the Board may reduce the number of directors or choose a substitute. The nominees have indicated their willingness to serve as directors, and we have no reason to believe any nominee will not be able to stand for reelection.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF MARK A. BLINN, ROGER L. FIX, DAVID E. ROBERTS AND JAMES O. ROLLANS TO SERVE AS DIRECTORS FOR A TERM EXPIRING AT THE 2015 ANNUAL MEETING OF SHAREHOLDERS.

Board of Directors

Biographical Information

Nominees to Serve a Term Expiring at the 2015 Annual Meeting of Shareholders

Mark A. Blinn, age 50, has served as a director and as President and Chief Executive Officer since October 2009. Mr. Blinn previously served as the Company’s Chief Financial Officer beginning in 2004 and Senior Vice President, Latin America Operations beginning in November 2007. Prior to his service with the Company, he was employed as the Chief Financial Officer of FedEx Kinko’s Office and Print Services, Inc., an international shipping and printing company, from 2003 to 2004, and as Vice President and Treasurer of Kinko’s, Inc. from 2002 to 2003. Mr. Blinn also served as Vice President and Chief Accounting Officer of Centex Corporation, a home building company, from 2000 to 2002 and as Managing Director of Corporate Finance beginning in 1999. Mr. Blinn’s letter agreement with the Company is described in this proxy statement under “Executive Compensation—Compensation Discussion and Analysis—Additional Executive Compensation Information—Employment Agreements.”

We believe Mr. Blinn is well qualified to serve as a director due to his position as the Company’s President and Chief Executive Officer, which provides the Board with intimate knowledge of the Company’s day to day operations. Mr. Blinn also brings an international and emerging markets perspective to the Board from his experience as the Company’s Senior Vice President, Latin America Operations.

Roger L. Fix, age 58, has served as a director since 2006 and serves as a member of the Finance Committee and the Organization and Compensation Committee. Mr. Fix is the President and Chief Executive Officer of Standex International Corporation (“Standex”), a publicly traded diversified manufacturing company. He has been its Chief Executive Officer since 2003, President since 2001 and member of the board of directors since 2001. He was Standex’s Chief Operating Officer from 2001 to 2002. He has also been a member of Standex’s Executive Committee since 2003. Before joining Standex, he was employed by Outboard Marine Corporation, a marine manufacturing company, as Chief Executive Officer and President from 2000 to 2001 and Chief Operating Officer and President during 2000. He also served as a member of its board of directors from 2000 to 2001. He served as Chief Executive of John Crane Inc., a global manufacturer of mechanical seals for pump and compressor applications in the process industry, from 1998 to 2000 and as its President — North America from 1996 to 1998. He was President of Xomox Corporation, a manufacturer of process control valves and actuators, from 1993 to 1996. He was also employed by Reda Pump Company, a manufacturer of electrical submersible pumping systems for oil production, from 1981 to 1993, most recently as Vice President and General Manager/Eastern Division. He was also employed by Fisher Controls Company, a manufacturer of process control valves and pneumatic and electronic instrumentation, from 1976 to 1981.

We believe that Mr. Fix is well qualified to serve as a director due to his executive leadership experience, including with John Crane Inc., Xomox Corporation and other competitor companies, which provides extensive knowledge of the Company’s products and valuable insight into the competitive landscape for flow control products. In addition to his board experience, Mr. Fix also has international operations experience and corporate development expertise.



		David E. Roberts, age 51, has served as a director since November 2011 and serves as a member of the Finance Committee and the Organization and Compensation Committee. He is currently Executive Vice President and Chief Operating Officer of Marathon Oil Corporation, an independent upstream company with international operations in exploration and production, oil sands mining and integrated gas. Prior to his current role, Mr. Roberts was the executive vice president in charge of Marathon’s worldwide upstream operations, a position he held since 2008. He joined Marathon in 2006 as senior vice president of business development. Before his positions at Marathon, Mr. Roberts held leadership roles at BG Group, an integrated natural gas company, and served as advisor to the vice chairman of Chevron Corporation from 2001 to 2003. We believe Mr. Roberts is well qualified to serve as a director due to his executive leadership experience, strong international operations background and extensive knowledge of and experience in the energy industry. This provides Mr. Roberts with a unique insight into the Company’s operational challenges and opportunities and its end-markets and customer needs.
		James O. Rollans, age 69, has served as a director since 1997. Mr. Rollans serves as the Non-Executive Chairman of the Board of Directors and as a member of the Audit Committee and the Corporate Governance and Nominating Committee. He also serves as an alternate director of all other committees for any committee member not in attendance at a committee meeting. Mr. Rollans is an independent corporate director and corporate financial advisor. Mr. Rollans was President and Chief Executive Officer of Fluor Signature Services, a subsidiary of Fluor Corporation, a major engineering, procurement and construction firm, from 1999 to 2001. He served as Senior Vice President of Fluor Corporation from 1992 to 1999, as its Chief Financial Officer from 1998 to 1999 and from 1992 to 1994, as its Chief Administrative Officer from 1994 to 1998, as its Vice President of Corporate Communications from 1982 to 1992, and as a member of its board of directors from 1995 to 2001. From February 2002 to February 2009, Mr. Rollans served as a director of Advanced Medical Optics, Inc., a developer and manufacturer of ophthalmic surgical and contact lens products. Mr. Rollans is also currently a director of Encore Credit Corporation, a mortgage finance company. We believe that Mr. Rollans is well qualified to serve as a director due to his executive leadership experience, including his various leadership roles with a Fortune 500 customer of flow control products and services, which provide a multi-disciplined perspective and a profound level of customer intimacy, and also due to his experience in managing challenging, complex projects in emerging markets like those faced by the Company. Mr. Rollans also has strong financial expertise gained from his financial leadership roles with Fluor Corporation and extensive board experience with other public companies.

Directors Serving a Term Expiring at the 2014 Annual Meeting of Shareholders

John R. Friedery, age 55, has served as a director since August 2007 and serves as a member of the Audit Committee and the Organization and Compensation Committee. From January 2008 to January 2010, Mr. Friedery served as Senior Vice President; President, Metal Beverage Packaging, Americas and Asia, for Ball Corporation, a provider of metal and plastic packaging for beverages, foods and household products, and of aerospace and other technologies services. From January 2004 to December 2007, he served as Ball Corporation’s Chief Operating Officer, Packaging Products Americas, and from April 2000 to May 2004 as the President, Metal Beverage Container operations, as well as other leadership roles in Ball Corporation since 1988. Prior to his employment with Ball Corporation, he served in field operations for Dresser/Atlas Well Services and in operations, exploration and production for Nondorf Oil and Gas.

We believe that Mr. Friedery is well qualified to serve as a director due to his extensive operational experience with an international industrial manufacturing focus, which provides a global business



		perspective and a deep understanding of the Company’s industry, end-markets and strategic focus. In addition to his board experience, Mr. Friedery also has experience with renewables and sustainability expertise gained from his service with Ball Corporation.
		Joe E. Harlan, age 52, has served as a director since August 2007 and serves as a member of the Corporate Governance and Nominating Committee and as Chairman of the Finance Committee. Mr. Harlan currently serves as the President of the Performance Products and Performance Systems Division and Executive Vice President of Dow Chemical Company, a global specialty chemical, advanced materials, agrosciences and plastics company. From 2008 to August 2011, he served as Executive Vice President of the Consumer and Office Business of the 3M Company, a diversified consumer products and office supply provider. From 2005 to 2008, Mr. Harlan served as 3M Company’s Executive Vice President of the Electro and Communications Business. He served as President and Chief Executive Officer of Sumitomo 3M Ltd., a diversified technology and products manufacturer, from 2003 to 2004. Prior to his career with 3M Company, he spent 20 years with General Electric Company, holding a number of leadership positions including serving as Vice President of Finance and CFO for GE Lighting Group (Global). We believe that Mr. Harlan is well qualified to serve as a director due to his strong international experience and familiarity with emerging markets, including Asian markets, gained through his various executive leadership roles. In addition to his board experience, Mr. Harlan also has experience in engineering and technology service from his positions with General Electric and 3M Company.
		Michael F. Johnston, age 64, has served as a director since 1997 and serves as a member of the Finance Committee and as Chairman of the Corporate Governance and Nominating Committee. Mr. Johnston served as the Chief Executive Officer, through May 2008, and as the chairman of the board of directors, from April 2002 to November 2008, of Visteon Corporation (“Visteon”), an automotive components supplier, and has served as Visteon’s President, Chief Executive Officer and Chief Operating Officer at various times since 2000. In May 2009, Visteon filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. Before joining Visteon, he was employed by Johnson Controls, Inc., a company serving the automotive and building services industry, as President of North America/Asia Pacific, Automotive Systems Group, from 1999 to 2000, President of Americas Automotive Group from 1997 to 1999 and in other senior management positions since 1991. Mr. Johnston has also been since October 2003 a director of Whirlpool Corporation, an appliance manufacturer, and since July 2010, a director of Armstrong World Industries, a building products manufacturer. We believe that Mr. Johnston is well qualified to serve as a director due to his executive leadership experience with cyclical manufacturing enterprises, including those serving multi-national and economically challenged end-markets, which provides a valuable operating perspective. Mr. Johnston also has extensive board of directors experience that we believe brings a seasoned corporate governance perspective.

Directors Serving a Term Expiring at the 2013 Annual Meeting of Shareholders


		Gayla J. Delly, age 52, has served as a director since January 2008 and serves as a member of the Audit Committee and as a member of the Finance Committee. Ms. Delly currently serves as President and Chief Executive Officer of Benchmark Electronics Inc., a company that provides contract manufacturing, design, engineering, test and distribution services to manufacturers of computers, medical devices, telecommunications equipment and industrial control and test instruments. Ms. Delly is a certified public accountant. At Benchmark Electronics Inc., she previously served as President from 2006 to December 2011, Executive Vice President and Chief Financial Officer from 2001 to 2006, and as Corporate Controller and Treasurer from 1995 to 2001. From March 2005 to October 2008, Ms. Delly also served as a member of the board of directors for Power One, a provider of power conversion and management solutions. We believe that Ms. Delly is well qualified to serve as a director due to her international manufacturing experience, with specific focus on engineering and technology in emerging markets, including Asia and Latin America, which provides valuable insight into the Company’s operations and assists in identifying product portfolio opportunities. In addition to her board experience, Ms. Delly has valuable executive leadership experience and financial expertise gained from her time with Benchmark Electronics Inc.
		Rick J. Mills, age 64, has served as a director since 2007 and serves as Chairman of the Audit Committee and as a member of the Corporate Governance and Nominating Committee. He served as a Vice President of Cummins Inc., a manufacturer of large diesel engines, and President of the Components Group at Cummins Inc., through from 2005 to March 2008. He was Vice President and President— Filtration Business from 2000 to 2005 and held other key management positions with Cummins Inc. from 1970 to 2000, including Corporate Controller and Chief Accounting Officer from 1996 to 2000. From February 2005 to April 2009, Mr. Mills served as a director of Rohm & Haas, a specialty chemicals company, which was sold to Dow Chemical in April 2009. From 2008 to 2010, Mr. Mills served as a director and member of the audit committee of GERDAU Ameristeel, the second largest mini-mill steel producer in North America, which was acquired by GERDAU, SA in August 2010. Since January 2012, Mr. Mills has served as a director and member of the audit committee of Commercial Metals Company, a global manufacturer, recycler and marketer of steel and metal products and related materials. We believe that Mr. Mills is well qualified to serve as a director due to his extensive knowledge of industrial manufacturing and cyclical end-markets, which provides a deep familiarity with the Company’s industrial challenges and opportunities. Additionally, Mr. Mills has valuable corporate governance and compliance expertise through his board of directors and audit committee experience.
		Charles M. Rampacek, age 68, has served as a director since 1998 and serves as a member of the Audit Committee and the Organization and Compensation Committee. Mr. Rampacek is currently a business and management consultant in the energy industry. Mr. Rampacek served as the Chairman of the Board, President and Chief Executive Officer of Probex Corporation (“Probex”), an energy technology company providing proprietary oil recovery services, from 2000 to 2003. From 1996 to 2000, Mr. Rampacek served as President and Chief Executive Officer of Lyondell-Citgo Refining, L.P., a manufacturer of petroleum products. From 1982 to 1995, he held various executive positions with Tenneco Inc. and its energy related subsidiaries, including President of Tenneco Gas Transportation Company, Executive Vice President of Tenneco Gas Operations and Senior Vice President of Refining. In 2005, two complaints seeking recovery of certain alleged losses were filed against former officers and directors of Probex, including Mr. Rampacek, as a result of the bankruptcy of Probex in 2003. These complaints were defended under Probex’s director and officer insurance by AIG, and settlement was reached and paid by AIG with bankruptcy court approval in the first half of 2006. An additional complaint was filed in 2005 against noteholders of certain Probex debt, of which Mr. Rampacek was a party. A settlement of $2,000 was reached and similarly approved in the first half of 2006.

From November 2006 to November 2011, Mr. Rampacek served as a member of the Board of Directors of Enterprise Products GP, LLC, which is the general partner of Enterprise Products Partners L.P., a publicly traded limited partnership that provides mid-stream services for the oil and gas industry. Since December 2009, Mr. Rampacek has also been a member of the Board of Directors of Cenovus Energy Inc., a Canadian publicly-traded company that is involved in natural gas and oil sands production and North American oil refining. He is a member of Cenovus Energy Inc.’s Nominating and Corporate Governance Committee, Reserve Committee and Safety, Environment and Responsibility Committee.

We believe that Mr. Rampacek is well qualified to serve as a director due to his extensive knowledge of and experience in the energy industry, including the oil and natural gas markets and with complex energy recovery technology, which provides unique insight into the Company’s end-markets and customer needs. Mr. Rampacek also has extensive board of directors experience and knowledge of corporate governance matters.

William C. Rusnack, age 67, has served as a director since 1997 and serves as Chairman of the Organization and Compensation Committee and as a member of the Corporate Governance and Nominating Committee. He is currently a private investor and independent corporate director. Mr. Rusnack was President, Chief Executive Officer, Chief Operating Officer and director of Premcor Inc. from 1998 to 2002. Before joining Premcor, Inc., Mr. Rusnack served for 31 years with Atlantic Richfield Company, (“ARCO”), an integrated petroleum company, in several positions including Senior Vice President of ARCO from 1990 to 1998 and President of ARCO Products Company from 1993 to 1998. He has also been since October 2001 a director and member of the governance and executive committees, as well as chairman of the organization and compensation committee, of Sempra Energy, an energy services company. Since January 2002, Mr. Rusnack has been a director and member of the executive committee, as well as chairman of the audit committee, of Peabody Energy, a coal mining company. Since April 2010, he has also served as a director and member of the compensation committee and nominating and governance committee of Solutia Inc., a producer of specialty chemicals and performance materials.

We believe Mr. Rusnack is well qualified to serve as a director due to his extensive knowledge of the energy industry, including the oil and natural gas markets from which we derive a large portion of our revenues, and his experience in infrastructure operations, which provides an intimate understanding of the Company’s customers and its operational challenges and opportunities. Mr. Rusnack also has extensive executive compensation and risk management expertise through his board experience with Sempra Energy, Peabody Energy and the Company.

Role of the Board; Corporate Governance Matters

The Board has a duty to oversee the Chief Executive Officer and other senior management in the competent and ethical operation of the Company on a day-to-day basis and help ensure that our shareholders’ best interests are being served. In its efforts to satisfy this duty, the Board has established internal guidelines designed to promote effective oversight of the Company’s vital business affairs that the Board monitors, which it updates as it deems appropriate.

The guidelines set parameters for the director recruiting process and the composition of Board committees. They also determine the formal process for review and evaluation of the Chief Executive Officer, individual directors and the Board’s performance. The guidelines further establish targets for director equity ownership and require a director to offer his or her resignation when such director’s principal occupation changes during a term of office. Under such circumstances, the Corporate Governance and Nominating Committee of the Board will review whether it is appropriate for the director to continue serving on the Board. Finally, these guidelines establish age limits for directors, which may be waived by the Board if deemed appropriate.

Further, the Board has adopted formal Corporate Governance Guidelines, which, among other things, contain a prescribed set of qualification standards with respect to the determination of director independence, which either meet or exceed the

independence requirements of the NYSE. Under the Corporate Governance Guidelines, only those directors who have no material relationship with the Company (except in his or her role as a director) are deemed independent. The Corporate Governance Guidelines specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company or its independent registered public accounting firm.

The Board has determined that, other than Mark A. Blinn, the Company’s President and Chief Executive Officer, each member of the Board, including all persons nominated for re-election, meet the independence standards set forth in the applicable rules of the SEC and the NYSE corporate governance listing standards.

The Board’s Corporate Governance Guidelines, as well as the Company’s Code of Ethics and Code of Business Conduct, are available on the Company’s website at www.flowserve.com under the “Investor Relations—Governance” caption.

Board Leadership Structure and Risk Oversight

The positions of Chairman of the Board and Chief Executive Officer have been separated at the Company since 2005. James O. Rollans, the Company’s current non-executive Chairman of the Board, presides over the meetings of the Board, including executive sessions of the Board where only non-employee directors are present. He reviews and approves the agendas for Board meetings, among his other duties as Chairman of the Board. He also serves as a member of the Audit Committee, as a member of the Corporate Governance and Nominating Committee and as an alternate member for all other Board committees. Mr. Rollans strives to attend all committee meetings when possible.

We currently believe that separating the positions of Chairman of the Board and Chief Executive Officer is most appropriate for the Company because it places an independent director in a position of leadership on the Board. We believe this independent leadership and the non-executive Chairman’s authority to call meetings of the non-employee directors adds value to our shareholders by facilitating a more efficient exercise of the Board’s fiduciary duties in the current structure. We also believe the non-executive Chairman further enhances independent oversight by being responsible for establishing the Board’s annual schedule and collaborating with the Chief Executive Officer on the agendas for all Board meetings. The separation of Chairman and Chief Executive Officer also allows the non-executive Chairman to provide support and advice to the Chief Executive Officer, reinforcing the reporting relationship, and accountability, of the Chief Executive Officer to the Board.

The Company’s Chief Executive Officer and other members of senior management are responsible for the ongoing assessment and management of the risks the Company faces, including risks relating to capital structure, liquidity and credit, financial reporting and public disclosure, operations and governance. The Board and each of the Board’s four committees (the Audit Committee, Finance Committee, Corporate Governance and Nominating Committee and Organization and Compensation Committee) oversee senior management’s policies and procedures in addressing these and other risks that fall within the scope of the Board’s and the committees’ respective areas of oversight responsibility. For example, the Board directly oversees risk management relating to strategic planning, the Finance Committee directly oversees risk management relating to capital structure and liquidity, the Corporate Governance and Nominating Committee directly oversees risk management relating to director independence and corporate governance and the Organization and Compensation Committee directly oversees risk management relating to employee compensation and succession planning. Additionally, the Audit Committee directly oversees risk management relating to financial reporting and public disclosure and legal and regulatory compliance and, in accordance with provisions of the NYSE Listed Company Manual, reviews and discusses, in a general manner, the process by which the Board and its committees oversee senior management’s exercise of risk management responsibilities. The Board is regularly informed through committee reports of each committee’s activities in overseeing risk management within their respective areas of oversight responsibility.

Meetings of the Board

The Board held seven regular meetings and five special meetings in 2011. Executive sessions of non-employee directors are normally held at each regular Board meeting. Any non-employee director may request that additional executive sessions be scheduled. Shareholders may communicate with the Company’s non-employee directors by following the instructions set forth under “—Shareholder Communications with the Board” below.

Board members customarily have attended the Company’s annual meetings of shareholders. All Board members attended the Company’s 2011 annual meeting of shareholders. In 2011, each director attended at least 75% of the meetings of the Board held during the period for which he or she has been a director, and each director attended at least 75% of the meetings of the Board committees on which he or she served, except for Mr. Fix, who attended five of the seven Finance Committee meetings in 2011. Mr. Fix attended all regularly scheduled meetings of the Finance Committee, but he was unable to attend two special teleconference meetings due to conflicts arising from his executive leadership responsibilities at Standex International Corporation.

Shareholder Communications with the Board

Shareholders and other interested parties may communicate with the Board directly by writing to: James O. Rollans, Chairman of the Board, c/o Flowserve’s Corporate Secretary, Flowserve Corporation, 5215 N. O’Connor Blvd., Suite 2300, Irving, Texas 75039. All such communications will be delivered to Mr. Rollans.

Committees of the Board

The Board maintains an Audit Committee, a Finance Committee, a Corporate Governance and Nominating Committee (“CG&N Committee”) and an Organization and Compensation Committee (“O&C Committee”). Only independent directors are eligible to serve on Board committees.

Each committee is governed by a written charter. The charters of the Audit Committee, Finance Committee, CG&N Committee and O&C Committee are available on the Company’s website at www.flowserve.com under the “Investor Relations—Governance” caption.

Audit Committee

The Audit Committee is composed of five directors: Rick J. Mills (Chairman); Gayla J. Delly; John R. Friedery; Charles M. Rampacek; and James O. Rollans. The Board has determined that Mr. Mills qualifies as an audit committee financial expert under SEC rules and has accounting or related financial management expertise for purposes of the NYSE corporate governance listing standards. The Board has also determined that all members of the Audit Committee are financially literate, within the meaning of the NYSE corporate governance listing standards, and meet the independence standards set forth in the SEC rules and the NYSE corporate governance listing standards.

The Audit Committee directly engages the Company’s independent auditors, pre-approves the scope of the annual external audit and pre-approves all audit and non-audit services to be provided by the independent auditor. The Audit Committee further approves and directly reviews the results of the Company’s internal audit plan. The Audit Committee also meets with management and the independent auditors to review the quality and accuracy of the annual and quarterly financial statements and considers the reports and recommendations of independent internal and external auditors pertaining to audit results, accounting practices, policies and procedures and overall internal controls. The Audit Committee also reviews and discusses, in a general manner, the process by which the Board and the other Board committees oversee senior management’s exercise of risk management responsibilities.

The Audit Committee meets regularly with the external and internal auditors in executive sessions to discuss their reports on a confidential basis. In addition, the Audit Committee prepares and issues the “Report of the Audit Committee” included in this proxy statement. The Audit Committee met nine times in 2011.

Finance Committee

The Finance Committee is composed of five directors: Joe E. Harlan (Chairman); Gayla J. Delly; Roger L. Fix; Michael F. Johnston; and David E. Roberts. The Board has determined that all members of the Finance Committee meet the independence standards set forth in the NYSE corporate governance listing standards.

The Finance Committee advises the Board on all corporate financing and related treasury matters regarding capital structure and major corporate transactions. The Finance Committee also approves major capital expenditures made by the Company and also advises the Board on the Company’s pension fund performance. The Finance Committee met seven times in 2011.

Corporate Governance and Nominating Committee

The CG&N Committee is composed of five directors: Michael F. Johnston (Chairman); Joe E. Harlan; Rick J. Mills; James O. Rollans; and William C. Rusnack. The Board has determined that all members of the CG&N Committee meet the independence standards set forth in the NYSE corporate governance listing standards.

The CG&N Committee is responsible for making recommendations to the Board for the positions of Chairman of the Board, President and Chief Executive Officer. The CG&N Committee is also responsible for recommending candidates for membership to the Board. Prior to considering nominee director candidates, the CG&N Committee assesses the appropriateness of the Board’s current size and composition and whether any vacancies on the Board are expected due to retirement or other factors. If additional directors are needed or vacancies are anticipated or otherwise arise, the CG&N Committee utilizes a variety of methods for identifying and evaluating nominee director candidates.

The identification and evaluation of director candidates begins with the Board’s Corporate Governance Guidelines, which establish the criteria for Board membership. As a starting point under the Guidelines, all prospective Board members must possess the highest professional and personal ethics. Board members should have varied professional expertise in fields of accounting and finance, engineering, industrial sales, manufacturing, international operations, human resources and field service. Additionally, all existing and prospective Board members should have a broad strategic view, possess a global business perspective and demonstrate relevant and successful career experience. A Board member’s service on the boards of other public companies should be limited to a number that permits them, given their individual circumstances, to responsibly perform all director duties and effectively represent the interests of the shareholders.

The Guidelines further articulate the Board’s firm belief that, underlying the aforementioned criteria, the Board’s members should have a diversity of backgrounds, which is viewed in comprehensive terms. In evaluating diversity of backgrounds, the Board considers individual qualities and attributes, such as educational background, professional skills, business experience and cultural viewpoint, as well as more categorical diversity metrics, such as race, age and gender. This consideration is implemented through the selection process for director nominees, and the Board assesses its effectiveness in promoting diversity through an annual self-assessment process that solicits feedback concerning the appropriateness of the Board’s diversity, among other critical performance factors.

The CG&N Committee considers various potential director candidates who may come to the attention of the CG&N Committee through current Board members, professional search firms, shareholders or other persons. The CG&N Committee generally retains a national executive-recruiting firm to research, screen and contact potential candidates regarding their interest in serving on the Board, although the CG&N Committee may also use less formal recruiting methods.

A shareholder desiring to recommend a candidate for election to the Board should submit a written notice, as required by the Company’s By-laws, including the candidate’s name and qualifications to our Corporate Secretary, who will refer the recommendation to the CG&N Committee. The CG&N Committee may require any shareholder-recommended candidate to furnish such other information as may reasonably be required to determine the eligibility of such recommended candidate or to assist in evaluating the recommended candidate. The CG&N Committee may require the submission of a fully completed and signed Questionnaire for Directors and Executive Officers on the Company’s standard form and a written consent by the shareholder-recommended candidate to serve as a director, if so elected.

All identified candidates, including shareholder-recommended candidates, are evaluated by the CG&N Committee using generally the same methods and criteria, although those methods and criteria may vary from time to time depending on the CG&N Committee’s assessment of the Company’s needs and current situation.

The CG&N Committee is also responsible for preparing materials for the Chief Executive Officer’s annual performance review conducted by the Board. Further, the CG&N Committee reviews and recommends, as deemed appropriate, changes to the Company’s corporate governance policies consistent with SEC rules and the NYSE corporate governance listing standards. The CG&N Committee met five times in 2011.

Organization and Compensation Committee

The O&C Committee is composed of five directors: William C. Rusnack (Chairman); Roger L. Fix; John R. Friedery; Charles M. Rampacek; and David E. Roberts. The Board has determined that all members of the O&C Committee meet the independence standards set forth in the NYSE corporate governance listing standards.

The O&C Committee is responsible for establishing executive compensation for officers, including the Chief Executive Officer and other corporate officers. As further discussed under “Executive Compensation,” decisions regarding compensation are made by the O&C Committee in a manner that is intended to be internally equitable, externally competitive and an incentive for effective performance in the best interests of our shareholders, while adhering to and promoting the Company’s risk management objectives. The O&C Committee is the administrator of the Company’s various equity and incentive compensation plans for key employees. The O&C Committee may, under certain circumstances, delegate routine or ministerial activities under these plans to management. The O&C Committee also reviews the recommendations of the Chief Executive Officer and the Vice President, Human Resources, regarding adjustments to the Company’s executive compensation programs. The O&C Committee has retained and regularly meets with its independent executive compensation consultant, Lyons, Benenson & Company Inc., which assists the O&C Committee in evaluating the Company’s compensation programs and adherence to the philosophies and principles stated below under “Executive Compensation—Compensation Discussion and Analysis.” The O&C Committee is also responsible for reviewing the management succession plan and for recommending changes in director compensation to the Board. The O&C Committee periodically reviews the organizational design, management development plans and managerial capabilities of the Company. The O&C Committee also prepares and issues the “Organization and Compensation Committee Report” included in this proxy statement. The O&C Committee met six times in 2011.

Compensation Committee Interlocks and Insider Participation

During 2011, the members of the O&C Committee included Messrs. Rusnack, Fix, Friedery, Rampacek and Roberts. None of the members of the O&C Committee were at any time during 2011 an officer or employee of the Company. None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or O&C Committee.

Board of Directors Compensation

The following table sets forth certain information with respect to our non-employee director compensation for the fiscal year ended December 31, 2011. Compensation information for Mr. Blinn is set forth below under “Executive Compensation—Summary Compensation Table.” Mr. Blinn did not receive any compensation solely for service as a director.


Name	Fees Earned or Paid in Cash ($)			Stock Awards ($)⁽¹⁾⁽²⁾		Total ($)
Gayla J. Delly		64,500	⁽³⁾		100,031		164,531
Roger L. Fix		69,000	⁽³⁾		100,031		169,031
John R. Friedery		69,000	⁽³⁾		100,031		169,031
Joe E. Harlan		70,000			100,031		170,031
Michael F. Johnston		70,000			100,031		170,031
Rick J. Mills		80,500	⁽³⁾		100,031		180,531
Charles M. Rampacek		60,000			100,031		160,031
David E. Roberts⁽⁴⁾		7,337			—		7,337
James O. Rollans		184,000	⁽³⁾⁽⁵ ⁾		100,031		284,031
William C. Rusnack		70,000			100,031		170,031
Kevin E. Sheehan⁽⁶⁾		23,077			—		23,077

(1)

Eligible directors received an annual equity grant of 828 shares of restricted common stock on May 19, 2011, the date of the Company’s 2011 annual meeting of shareholders. The amounts shown in this column reflect the grant date fair value of the awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, “Compensation – Stock Compensation”, and are calculated using a price per share of $120.81, the closing market price of the Company’s common stock as reported by the NYSE on the date of grant. Assumptions used in the valuations are discussed in Note 5 to the Company’s audited consolidated financial statements for the year ended December 31, 2011 in the Annual Report on Form 10-K filed on February 22, 2012.

(2)	The current directors each had 828 shares of restricted common stock outstanding at December 31, 2011; all other shares held are vested. No director had stock option awards outstanding at December 31, 2011.

(3)	Amount reported includes a 15% premium to actual fees due to the director’s election to defer all or a portion of cash retainer payments in the form of Company common stock under the Company’s director stock deferral plan.

(4)	Mr. Roberts was appointed to the Board on November 17, 2011.

(5)	Includes an additional $100,000 payment for services as non-executive Chairman of the Board.

(6)	Mr. Sheehan retired from the Board effective as of the 2011 annual meeting of shareholders.

2011 Director Compensation Elements

In 2011, non-employee directors received, as applicable: (a) an annual cash retainer of $50,000; (b) an annual cash committee service fee of $5,000 (per committee); (c) an annual cash committee chairman service fee of $10,000; and (d) equity compensation with a target value of $100,000. Directors are also eligible to receive special additional compensation when performing services that have been determined by the Board to be well above and beyond the normal director service requirements. The Board has set a compensatory rate of $3,500 per day for such services, though no fees were paid for such services in 2011. These compensation elements and amounts were established by the Board after review of data prepared by Lyons, Benenson & Company Inc., the O&C Committee’s independent consultant, showing competitive director compensation levels for the Company’s high performance peer group, which is discussed under “Executive Compensation.”

Pursuant to the Company’s cash and stock director deferral plans and equity compensation plans, directors may elect to defer all or a portion of their annual cash compensation and equity compensation. The annual cash compensation may be deferred in the form of cash or in the form of an equivalent value of Company common stock. Compensation deferred in the form of cash accrues interest while deferred at rates that do not exceed market rates or constitute preferential earnings. If a director elects to defer cash compensation in the form of Company common stock, the director receives a 15% premium on the amount deferred.

The equity portion of non-employee director compensation is provided in the form of restricted common stock of the Company having a $100,000 fair market valuation at the time of grant, which is established on the date of the annual meeting of

shareholders of the applicable year. Voting rights accompany such restricted common stock, which fully vest after the earlier of one year from the date of grant, the termination of the director’s service due to death or disability or a change in control. Under the Company’s Corporate Governance Guidelines, each restricted common stock grant must be held by the director for the lesser of five years from the date of grant or one year after the director ceases service on the Board. Additionally, all non-employee directors must own shares of Company common stock with a value at least five times his or her annual cash retainer (currently valued at $250,000) by his or her fifth anniversary of Board service. If the stock ownership requirement is not met, the director will receive all future Board compensation in the form of Company common stock until the requirement is satisfied.

Non-Executive Chairman of the Board Compensation

Mr. Rollans receives $100,000 annually for his service as non-executive Chairman of the Board. This payment is in addition to Mr. Rollans’ basic annual retainer and committee service fee compensation that he receives for serving as a Board member and a committee member. Mr. Rollans receives this additional compensation on a quarterly basis, in accordance with the pre-established director compensation cycles.

Executive Officers

The following sets forth certain information regarding the Company’s executive officers. Information pertaining to Mr. Blinn, who is both a director and executive officer of the Company, is presented above under “Board of Directors—Biographical Information—Nominees to Serve a Term Expiring at the 2012 Annual Meeting of Shareholders.”


Name	Age	Position With the Company
Mark A. Blinn	50	President, Chief Executive Officer and Director
Mark D. Dailey	53	Senior Vice President and Chief Administrative Officer
Thomas E. Ferguson⁽¹⁾	55	Senior Vice President and President, Flow Solutions Group
Richard J. Guiltinan⁽² ⁾	58	Senior Vice President Finance and Chief Accounting Officer
Thomas L. Pajonas	56	Senior Vice President and Chief Operating Officer
Ronald F. Shuff	59	Senior Vice President and General Counsel
Michael S. Taff	49	Senior Vice President and Chief Financial Officer

(1)	Transitioned from his role effective January 9, 2012.

(2)	Retired effective March 31, 2012.

Mark D. Dailey has served as Senior Vice President and Chief Administrative Officer since February 2010. Mr. Dailey previously served as Senior Vice President, Human Resources from November 2006 and Chief Compliance Officer from May 2005. He served as Vice President, Supply Chain and Continuous Improvement, from 1999 until 2005. Before joining the Company, Mr. Dailey was Vice President, Supply Chain and held other supply chain management positions from 1992 to 1999 for the North American Power Tools Division of The Black and Decker Corporation.

Thomas E. Ferguson, who transitioned from his role effective January 9, 2012, served as Senior Vice President from December 2006 and as President of the Company’s Flow Solutions Group from January 2010 through January 2012. Mr. Ferguson previously served as President of Flowserve Pump Division from 2003 to December 2009. He was President of Flow Solutions Division from 2000 to 2002, Vice President and General Manager of Flow Solutions Division North America from 1999 to 2000 and Vice President of Marketing and Technology for Flow Solutions Division from 1997 to 1999.

Richard J. Guiltinan, who retired effective March 31, 2012, served as Senior Vice President Finance from February 2010 and Chief Accounting Officer from 2004 through March 2012. He was previously employed as a consultant to Chevron on three multinational restructuring and merger integration projects in 2002 and 2003. From 1985 to 2001, Mr. Guiltinan served in accounting, financial management and operating positions at Caltex Corporation, a joint venture of Chevron and Texaco, including as Chief Financial Officer from 2000 to 2001.

Thomas L. Pajonas has served as Senior Vice President and Chief Operating Officer since January 2012. From 2004 to January 2012, he served as President of the Flow Control Division, holding the positions of Vice President from 2004 to December 2006 and Senior Vice President from December 2006. He was previously employed as Managing Director of Alstom Transport, a supplier of rail products, from 2003 to 2004 and Senior Vice President from 1999 to 2003 of the Worldwide Power Boiler Business of Alstom, Inc. From 1996 to 1999 he served in various capacities as Senior Vice President and General Manager International Operations and subsequently Senior Vice President and General Manager Standard Boilers Worldwide of Asea Brown Boveri.

Ronald F. Shuff has served as General Counsel since 1988, holding the positions of Vice President from 1990 to December 2006 and Senior Vice President from December 2006 to the present. Mr. Shuff also served as Secretary from 1989 to May 2011.

Michael S. Taff has served as Senior Vice President and Chief Financial Officer since January 2012. He previously served as Senior Vice President and Chief Financial Officer of The Babcock & Wilcox Company, a leading international provider of energy products and services, from July 2010 to November 2011. Prior to this position, he served as Senior Vice President and Chief Financial Officer of McDermott International, Inc., a leading engineering, procurement, construction and installation company focused on complex offshore oil and gas projects, from April 2007 to July 2010, and as its Vice President and Chief Accounting Officer from June 2005 to April 2007. From September 2010 through December 2011, Mr. Taff served as a director of USEC Inc., a publicly-traded supplier of enriched uranium and nuclear industry-related services to commercial nuclear power plants.

Executive Compensation

Compensation Discussion and Analysis

Executive Summary

Introduction. The following sections contain our Compensation Discussion and Analysis (“CD&A”). This CD&A provides an overview and analysis of our executive compensation program and policies and the material compensation decisions we have made for our principal executive officer and our other executive officers named in the “Summary Compensation Table” on page 33. We refer to this group of executive officers collectively as our “Named Executive Officers” throughout this document. During 2011, our Named Executive Officers were:

•

Mark A. Blinn, President and Chief Executive Officer (“CEO”) (principal executive officer);

•

Richard J. Guiltinan, Senior Vice President Finance and Chief Accounting Officer (principal financial officer), who retired in March 2012;

•

Thomas E. Ferguson, Senior Vice President and President of Flow Solutions Group, who transitioned from his role in January 2012;

•

Thomas L. Pajonas, Senior Vice President and Chief Operating Officer (formerly President, Flow Control Division); and

•

Ronald F. Shuff, Senior Vice President and General Counsel.

On January 16, 2012, Michael S. Taff was appointed Senior Vice President and Chief Financial Officer. As he was not employed by the Company or serving as an executive officer in 2011, compensation information for Mr. Taff is not included in this CD&A. Initial decisions concerning Mr. Taff’s compensation in 2012 were made in accordance with, and his compensation elements are consistent with, the compensation objectives, principles and elements described in this CD&A.

Pay for Performance. Each year, the O&C Committee, which is made up entirely of independent directors, determines the total amount and appropriate mix of compensation for our executive officers, including the Named Executive Officers. We believe that our compensation program should be designed so that pay is commensurate with the level of

performance generated, with incentive compensation representing the majority of total compensation. Accordingly, on average the Named Executive Officers had 72.5% of their pay “at risk,” or dependent upon both the Company’s and each individual’s performance.

Global economic conditions began to stabilize in the latter part of 2010 following the global recession, and capital investment spending began to increase as certain demand forecasts improved, which enabled us to enter 2011 with increased order backlog compared to 2010. Throughout 2011, economic conditions continued to show signs of improvement, and we experienced overall improved demand for our products and services. These positive developments were tempered by lingering economic uncertainty in certain regions, including Europe, and increased competitiveness in our industry, which continued to put pressure on our margin performance. Additionally, the tragic Japanese tsunami and resulting Fukushima disaster, as well as increased turmoil in the Middle East and North Africa, presented us with unique challenges. However, our continued focus on our strategy, meeting the needs of our customers and returning value to our shareholders enabled us to capitalize on opportunities presented by our markets, which drove the following full year 2011 financial results:

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Our order bookings were $4.66 billion, which was up 10.2% over 2010 and reflected increasing customer activity during the year, principally in the oil and gas, chemical and general industries.

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Our sales were $4.51 billion, which was up 11.9% over 2010 and reflected increased short cycle original equipment activity and increased aftermarket activity.

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Our reported operating income for the year was $618.7 million, which was up 6.4% over 2010.

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Our operating margin was 13.7%, which was down from 14.4% in 2010 and reflected lower margins on certain large projects and charges relating to certain delayed projects, partially offset by a sales mix shift to more favorable aftermarket sales.

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Our reported operating cash flow was $218.2 million, which was down 38.7% compared to 2010 and reflected increased cash used in building inventory to support our growing order book, but also working capital build in receivables and past due backlog resulting from tougher payment terms and isolated execution issues.

Based on our 2011 results, our operating income performance metric was 96.4% of our pre-established goal, and our operating cash flow metric was 37.7% of our pre-established goal. As discussed in more detail under “—Elements of the Executive Compensation Program—Annual Incentive Opportunity”, both of these performance metrics being below plan resulted in an annual incentive award payout of 61.5% of target for our Named Executive Officers, reflecting our pay for performance philosophy.

The Company’s average return on net assets (“RONA”) for the 2009-2011 performance period was 20.8%, representing approximately 225% of the average RONA of the high performance peer group, which is described in more detail under “—Executive Compensation Program Objectives and Principles”. This resulted in the contingent performance shares awarded for this performance period vesting at 200% of target. Additionally, the Company’s total shareholder return (“TSR”) for 2009-2011, which is measured by the change in our stock price from the end of 2008 through the end of 2011, plus reinvestment of dividends paid during the period, was 100.3%.

2009-2011 Total Shareholder Return

LOGO

2011 Executive Compensation Vote. At the 2011 annual meeting of shareholders, our shareholders voted 94.1% in favor of the compensation of our named executive officers as described in our 2011 proxy statement. In consideration of the results, the O&C Committee acknowledged the overwhelming support received from our shareholders and viewed the results as a confirmation of the Company’s existing executive compensation policies and decisions. Accordingly, we did not significantly change our compensation principles and objectives in 2011.

Compensation Objectives and Core Elements. Our key executive compensation objectives are to attract and retain key leaders, reward current performance, drive future performance and align the long-term interests of our executives with those of our shareholders. In pursuing these objectives, the O&C Committee uses certain guiding principles in designing the specific elements of the executive compensation program.

Consistent with these principles, the core elements of our executive compensation program consist of:

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cash compensation, in the form of market competitive base salary and an annual incentive opportunity tied to operating income and operating cash flow performance against pre-established goals; and

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long-term equity compensation, in the form of restricted stock that vests over time and contingent performance shares that vest, if at all, based on the achievement of benchmarked financial performance metrics designed to reinforce our business objectives and values.

Other benefits are provided to the Named Executive Officers that are generally consistent with those provided to other employees of the Company, including health plans and retirement benefits.

Summary. This CD&A is intended to facilitate a better understanding of the detailed information provided in our executive compensation tables that follow by analyzing such data within the context of our overall compensation program. To guide the discussion and analysis, we have organized our CD&A after this “Executive Summary” into the following sections:

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Oversight of the Executive Compensation Program – This section describes the respective roles and responsibilities of the O&C Committee and the O&C Committee’s independent compensation consultant.

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Executive Compensation Program Objectives and Principles – This section describes the objectives that guide our compensation programs and discusses the individual principles the O&C Committee has established to drive our achievement of those objectives, including how our high performance peer group is established and how compensation is benchmarked to market reference points.

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Elements of the Executive Compensation Program – This section discusses the individual elements of our compensation program for the Named Executive Officers, including base salary, annual cash incentive opportunity, long-term equity incentives (including stock ownership requirements), pension plan, severance benefits, change-in-control plan and certain other benefits.

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Additional Executive Compensation Information – This section includes an overview of other important executive compensation programs and policies, including employment agreements, tax and accounting implications and specific discussion of the CEO’s compensation in 2011.

Oversight of the Executive Compensation Program

Our executive compensation program is administered by the O&C Committee. Consistent with the NYSE corporate governance listing standards, the O&C Committee is composed entirely of independent, non-employee members of the Board. In addition, the non-executive Chairman of the Board generally attends the meetings of the O&C Committee.

As reflected in its charter, the O&C Committee has overall responsibility for setting the compensation for our CEO and for approving the compensation of our other executive officers, including the other Named Executive Officers. The O&C Committee also oversees the alignment of organizational design and management development in support of achieving our operational objectives and strategic plans and monitors the policies, practices and processes designed to develop our core organizational capabilities and managerial competencies.

The O&C Committee regularly meets with its independent executive compensation consultant, Lyons, Benenson & Company Inc. (“LB&Co”). LB&Co assists and advises the O&C Committee on all aspects of our executive compensation program, and it provides no other services to the Company. The services it provides include:

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providing and analyzing competitive market compensation data;

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analyzing the effectiveness of executive compensation programs and making recommendations, as appropriate;

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assisting in the design and negotiation of employment agreements, if applicable;

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analyzing the appropriateness of the comparator high performance peer group (discussed below); and

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evaluating how well our compensation programs adhere to the philosophies and principles stated below under “—Executive Compensation Program Objectives and Principles.”

The O&C Committee is also responsible for reviewing the management succession plan and for recommending changes in director compensation to the Board. On matters pertaining to director compensation, the O&C Committee also receives data, advice and counsel from LB&Co. The O&C Committee periodically reviews the organizational design, management development plans and managerial capabilities of the Company. The O&C Committee also prepares and issues the Organization and Compensation Committee Report included in this proxy statement.

Executive Compensation Program Objectives and Principles

Our key compensation objectives are to attract and retain key leaders, reward current performance, drive future performance and align the long-term interests of our executives with those of our shareholders. While the individual compensation elements may differ, the design of the executive compensation program is generally based on the same objectives as the overall compensation program provided to all of our employees. The O&C Committee has established the following principles, which are meant to effect these compensation objectives and guide the design and administration of specific plans, agreements and arrangements for our executives, including the Named Executive Officers.

Compensation Should be Performance-Based. The O&C Committee believes that a significant portion of our executives’ total compensation should be tied to how well they perform individually and should be “at risk” based on how well their respective divisions (where applicable) and the Company perform relative to applicable financial and non-financial objectives. To accomplish this, the O&C Committee uses a variety of targeted, performance-based compensation vehicles in our executive compensation program that are specifically designed to incorporate performance criteria that promote our annual operating plan and long-term business strategy, build long-term shareholder value and avoid encouraging excessive risk-taking.

As the O&C Committee believes that there should be a strong correlation between executive pay and Company performance, in years when our performance exceeds objectives established for the relevant performance period, executive officers should be paid more than 100% of the established target award. Conversely, when performance does not meet the established objectives, incentive award payments should be less than 100% of the established target level or eliminated altogether if performance is below threshold performance levels.

Compensation Should Reinforce Our Business Objectives and Values. Our business vision is to become the world’s most respected company in flow management through our industry expertise, innovative solutions and community commitment. Seven key strategies for achieving this vision are communicated to all our employees, and are referred to in this proxy statement as our key strategies. These key strategies include: Disciplined Profitable Growth; Customer Intimacy; Employee Focus; Innovation and Portfolio Management; Strategic Localization; Operational Excellence; and Sustainable Business Model. The O&C Committee considers these strategies, as well as the Company’s risk tolerance, when identifying the appropriate incentive measures and when assigning individual goals and objectives to the Named Executive Officers.

Performance-Based Compensation Should be Benchmarked. The O&C Committee believes that the use of internal performance metrics alone yields an incomplete picture of Company performance. Accordingly, the performance-based element of our executive compensation program also emphasizes and evaluates the Company’s performance relative to organizations in a benchmark “high performance peer group” (“HPPG”) of high performance cyclical industrial manufacturers. This evaluation serves as a means to assess, on a comparative basis, how well we deliver results that build long-term shareholder value, which in turn allows us to better establish the performance expectations of senior management in leading the Company.

For the 2007-2009, 2008-2010 and 2009-2011 performance periods, our HPPG consisted of the following companies:


Crane Co.	Eaton Corp.	ITT Industries Inc.	Pentair Inc.
Curtiss-Wright Corp.	Gardner-Denver	Lincoln Electric Holdings Inc.	Rockwell Automation Inc.
Danaher Corp.	IDEX Corporation	Moog Inc.	Watts Water Technology
Donaldson Co Inc.	Illinois Tool Works Inc.	PACCAR Inc.	Weir Group Plc

The process for establishing this HPPG began by compiling an initial sample of potential comparator organizations from among current competitors, industries based on relevant Standard Industrial Classification (“SIC”) codes, the Fortune 1000 Industrial and Farm Equipment and the S&P 1500 Industrial. A top-down, multi-stage filtering approach was then utilized to distill the comparator sample and establish the HPPG.

In the interest of having a more consistent and functional benchmarking standard, the O&C Committee strives to reevaluate the HPPG at least once every three years, and a detailed process is followed in identifying and evaluating organizations appropriate for inclusion. The last scheduled review of the HPPG was undertaken in late 2009. As a result of this review, the O&C Committee determined certain changes to the HPPG were advisable, primarily to help ensure the continuing high-performance character of the included member organizations and, as the Company has grown and evolved over the last several years, to help ensure the group appropriately reflects the operational and strategic profile of the Company.

As a result, our HPPG for the performance periods beginning in 2010 consists of the following companies:


Cameron International	Dresser-Rand Group Inc.	Lincoln Electric Holdings Inc.	SKF AB
Cooper Industries Plc	Gardner Denver Inc.	Nordson Corp.	Sulzer
Danaher Corp	Goodrich Corp.	Pall Corp.	Weir Group PLC
Donaldson Co Inc.	Illinois Tool Works Inc.	Parker Hannifin Corp.	Westinghouse Air Brake
Dover Corp.	ITT Corp.	Rockwell Automation Inc.	Technologies Corp.

The process for establishing the current HPPG began by compiling an initial sample of potential comparator organizations from S&P 1500 and FORTUNE Industrials, current peers and relevant competitors based on SIC codes and Global Industrial Classification Standards. A top-down, multi-stage filtering approach, with updated criteria, was then utilized to distill the comparator sample. The first filter imposed a revenue requirement of between $1 billion and $16 billion. The second filter focused on core financial criteria relevant to the Company, which included revenue growth, operating cash flow and operating margin, two of which were required to be above the industrial median. The next filter imposed mandatory standalone criteria that address certain operational and strategic aspects, which included a RONA above the industrial median, a three-year TSR above the industrial 25th percentile, an end-to-end supply chain and greater than 30% multinational presence.

This filtering approach produced a group of 32 organizations. These organizations were then subjected to additional review to identify key business drivers that the O&C Committee believed would impact an organization’s ability to be a fair point of comparison for the Company over the next three years. In this additional review, the O&C Committee examined three-year RONA deviation from mean, credit ratings and cost of capital, average tax rates (for indications of non-standard business costs), industry sub-groups (to promote alignment with the Company’s “Machinery-Diversified” category), unusual compensation practices and multinational presence (to align more closely to the Company’s approximate 70% multinational presence). This process resulted in the additional elimination of 13 organizations and produced the final HPPG identified above.

Compensation Levels Should be Market Competitive. To further implement the compensation and performance principles described above, namely building long-term shareholder value and the attraction and retention of executive talent, at least once each year the O&C Committee reviews market compensation survey data compiled and prepared by management and their executive compensation consultant, which is also reviewed by LB&Co, to evaluate how and whether our executive compensation program is market competitive. The survey data used by the O&C Committee is gathered from two key sources: (i) information for comparable executive positions within the HPPG, as identified above; and (ii) information from a broad group of durable goods manufacturing companies using Hewitt Associates’ “Total Compensation Measurement^tm survey” (the “Hewitt Survey”), which we sometimes refer to as the broad or broader market. The O&C Committee does not limit its market analysis to survey data relating only to the organizations in our HPPG because of the limited scope of available compensation data and the recognition that potential candidates for qualified executives, as well as market opportunities for our current executives, are not necessarily limited to companies in our industry sectors.

The O&C Committee uses this survey data to benchmark our executives’ base salary, annual bonus opportunities, total cash compensation, long-term incentive compensation and total direct compensation. Additionally, the O&C Committee uses the survey data to evaluate how, for each executive position, the O&C Committee’s compensation actions are appropriate, reasonable and consistent with the Company’s philosophy, practices and policies, considering the various labor markets in which we compete for executives.

The O&C Committee believes that setting target compensation at levels approximating the market median balances our interests in maintaining market competitive compensation and organizational efficiency. As such, base salary and target annual incentive opportunity for our executives are both generally set at levels approximating the 50th percentile of both the HPPG and the broad market taken from the Hewitt Survey. Long-term incentive compensation is set at levels approximating an average of the 50th percentile opportunity of the HPPG and the 75th percentile opportunity of the broad market taken from the Hewitt Survey. The percentile differences in reference points for the long-term incentive compensation are due to the performance metrics for long-term incentive compensation being set in reference to the higher performing members of the HPPG, which generally results in more rigorous performance targets than when compared to the broader market. With these more demanding performance metrics, the O&C Committee believes that it is appropriate to use a higher percentile reference for the broad market when setting long-term incentive compensation targets. In utilizing and adhering to these compensation benchmarks, the O&C Committee thus establishes goals for both absolute and relative Company performance that may be at or above median performance, so that performance and compensation may be objectively determined at the end of the performance period. As discussed, actual total direct compensation, which may be at, above or below the competitive median, varies and is determined by performance against these pre-established measures and objectives.

Incentive Compensation Should Represent the Majority of Total Compensation. The O&C Committee believes that the proportion of an executive’s total compensation that varies, or is “at risk,” based on individual, division, function and/or corporate performance should increase as the scope and level of the executive’s business responsibilities increase. Accordingly, for 2011, on average 72.5% of the total target-direct compensation of the Named Executive Officers at the time of award was tied to our stock price or our performance. The percentage of each Named Executive Officer’s total target-direct compensation for 2011 that was at risk as of the time of award is presented in the following table.


Named Executive Officer	Percent of Fiscal 2011 Pay “At Risk” (1)
*Mark A. Blinn*		82.6%
*Richard J. Guiltinan*		66.7%
*Thomas E. Ferguson*		75.0%
*Thomas L. Pajonas*		71.4%
*Ronald F. Shuff*		69.7%

(1) Calculated by dividing (i) the sum of the annual incentive opportunity and target long-term incentive opportunity by (ii) the sum of the annual incentive opportunity, target long-term incentive opportunity and base salary.

Incentive Compensation Should Balance Short-Term and Long-Term Performance. As stated above, the O&C Committee believes that executive compensation should be linked to building long-term shareholder value while remaining consistent with our business objectives and values. Our executive compensation program addresses this objective by including long-term incentives in the form of equity-based awards, such as restricted common stock and contingent performance shares, which makes the performance of the Company’s common stock a targeted incentive. As discussed in further detail below, we have also established minimum stock ownership requirements for our executives that carry associated penalties if they are not met.

The O&C Committee also recognizes that, while stock prices correlate to corporate performance over the long-term, other factors, such as general economic conditions, industry business cycles and varying attitudes among investors toward the stock market in general and specific industries and/or companies in particular, may significantly affect stock prices at any point in time. The influence of these other factors makes performance of the Company’s common stock alone an incomplete measure of the Company’s performance. Accordingly, the annual cash components of the executive compensation program, which consist of base salary and an annual cash incentive opportunity, emphasize current or short-term corporate performance and the realization of defined business and financial objectives, which tend to be independent of short-term fluctuations in the price of the Company’s common stock.

Over the past several years, the O&C Committee has maintained a ratio of base salary and annual cash incentive opportunity (short-term focus compensation) to long-term incentive compensation (long-term focus compensation) that is more heavily weighted towards long-term compensation for our Named Executive Officers. The O&C Committee believes that this greater emphasis on long-term compensation appropriately aligns the executives’ total compensation with the Company’s short-term and long-term performance objectives, as it provides each Named Executive Officer a competitive amount of cash compensation each year (with the opportunity to increase that amount if annual incentive objectives are exceeded), complemented by an opportunity to earn a substantial amount of additional compensation if the Company and the executives are successful in achieving the Company’s long-term objectives. For the CEO, the emphasis on long-term compensation is greater than that for the other Named Executive Officers, which the O&C Committee believes is appropriate in light of the position’s strategic focus, global governance and management responsibilities and accompanying risks.

Long-Term Incentives Should Balance Stock- and Financial-Based Achievements. In 2011, our long-term incentive awards for the Named Executive Officers took the form of an equally-weighted mix of restricted common stock, which generally vest ratably over time, and contingent performance shares, which generally vest at the expiration of a 3-year performance period based on RONA performance compared to that of the HPPG. The O&C Committee has determined that this long-term incentive mix appropriately encourages long-term equity ownership, promotes a balance between stock-based and financial-based achievements and aligns the interests of the Named Executive Officers with the Company’s risk profile and the interests of our shareholders.

While the O&C Committee approved the guidelines for determining the value of long-term incentive awards in 2007, the O&C Committee may in the future make adjustments to the current mix of award types, adjust vesting conditions or approve different types of awards as part of its overall long-term incentive program. Any review of the long-term incentive program would be undertaken as part of the established practice of annually approving and granting equity awards to the long-term incentive plan participants at the O&C Committee’s annual compensation review, as discussed below.

Our Executive Compensation Program is Reviewed Annually for Effectiveness. At the first regular committee meeting following our fiscal year end, the O&C Committee conducts a comprehensive review of all components of our executive compensation program, with the input of LB&Co, in light of evolving market practices in the general industry, external regulatory requirements, the competitive market for executives, our risk management objectives and our executive compensation philosophy. In conducting its review, the O&C Committee reviews information related to each executive officer’s income and benefits, including base salary, target incentive, retirement income and health and welfare benefits. This review and the resulting compensation program changes for 2011 are described below under “—Annual Executive Compensation Program Review and Compensation Risk.”

Elements of the Executive Compensation Program

Overview. The primary elements of the Company’s executive compensation program in 2011 were:

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base salary;

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an annual incentive opportunity, which is paid in cash;

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long-term incentives (including restricted common stock and contingent performance shares coupled with stock ownership requirements);

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pension plan;

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severance benefits;

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change-in-control plan; and

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certain perquisites and other benefits.

The O&C Committee’s process of reviewing the executive compensation program and setting compensation levels for our Named Executive Officers involves several components. During the first quarter of each year, the O&C Committee reviews each Named Executive Officer’s total compensation. The O&C Committee members also meet regularly with the Named Executive Officers at various times during the year, both formally within Board meetings and informally outside of Board meetings, which allows the O&C Committee to assess directly each Named Executive Officer’s performance. The O&C Committee also solicits input from all non-employee members of the Board as to the CEO’s performance during the year.

Except in years of CEO transition where the incumbent officer has completed less than one year of service in this capacity, the O&C Committee considers the results of the CG&N Committee’s process for reviewing the CEO’s performance with all non-employee Board members. The CG&N Committee’s process includes the non-employee Board members individually and collectively presenting their assessment, and the CEO providing his assessment, of the CEO’s performance. The O&C Committee uses these results when considering the compensation for the CEO.

In addition, the CEO annually presents an evaluation of each other Named Executive Officer to the O&C Committee, which includes a review of each officer’s contributions and performance over the past year, strengths, weaknesses, development plans and succession potential. The CEO also presents compensation recommendations for each Named Executive Officer for the O&C Committee’s consideration. Following this presentation and a benchmarking review for pay, the O&C Committee makes its own assessments and formulates compensation amounts for each Named Executive Officer with respect to each of the elements in the Company’s executive compensation program as described below.

Base Salary. During the first quarter of each year, the O&C Committee reviews and establishes the base salaries of the Named Executive Officers. The O&C Committee has established and maintains base salary market reference points for the Company’s various executive positions indicated by the market compensation survey data compiled and prepared by management and independently reviewed by LB&Co. For each Named Executive Officer, the O&C Committee takes into account the scope of his or her responsibilities, experience and individual performance and then balances these factors against competitive salary practices. The O&C Committee also considers internal pay equity on an annual basis within the Company with respect to the other executives and references external benchmarks provided by LB&Co. The O&C Committee did not assign any relative or specific weights to these factors. Because we are committed to a pay-for-performance philosophy, the O&C Committee generally manages, and in 2011 did manage, base salary levels to approximate the market median of companies within the HPPG.

Based on the factors discussed above, the Named Executive Officers’ salaries were adjusted in 2011 as shown in the following table, which were generally within the range of annual salary adjustment percentages for all Company employees.


Named Executive Officer	2011 Base Salary Increase %
*Mark A. Blinn*		3.0%
*Richard J. Guiltinan*		2.0%
*Thomas E. Ferguson*		3.0%
*Thomas L. Pajonas*		2.0%
*Ronald F. Shuff*		2.0%

The base salaries paid to the Named Executive Officers during 2011 are shown in the “Summary Compensation Table” under the “Salary” column. Mr. Blinn’s base salary and other compensation components in 2011 are discussed below in further detail under “—Additional Executive Compensation Information—Chief Executive Officer Compensation in 2011.”

Annual Incentive Opportunity. During the first quarter of each year, the O&C Committee establishes an annual cash incentive opportunity for each Named Executive Officer under the Company’s Annual Incentive Plan. At that time, the O&C Committee approves: (i) the overall Company performance measures for the fiscal year; (ii) the divisional performance measures for the fiscal year; and (iii) a target annual incentive opportunity for each Named Executive Officer.

Setting Company Performance Measures. The O&C Committee, working with the CEO and LB&Co, evaluates and approves the performance measures for the Company for each fiscal year. In order to help ensure that the primary focus of the Named Executive Officers was setting the overall strategic direction of the Company and achieving overall Company results aligned to support building shareholder value, the O&C Committee evaluated each Named Executive Officer’s performance based on the results of the Company as a whole. As such, the Company’s performance measures, unadjusted for extraordinary events, established for 2011 were as follows:


2011 Performance Measures	Weighting			2011 Target (in millions)
Operating Income		80.0	%	$	649.6
Cash Flows from Operations		20.0	%	$	398.7

The metrics presented in the table above were evaluated using pre-defined internal criteria. The Operating Income metric coincides in all material respects with the Company’s audited financial results. The Cash Flows from Operations metric is calculated by subtracting currency effects, the impact of miscellaneous income and expense items and tax expense from operating income to arrive at an adjusted operating income figure, which is then adjusted for changes in working capital, certain accrued liabilities, depreciation and amortization and gain/loss on asset sales. In most years, this metric coincides in all material respects with the Company’s audited financial results; however, for 2011, our Cash Flows from Operations metric was approximately $68 million below the Company’s reported cash flows from operations. Additionally, the O&C Committee may exercise its judgment, within parameters it establishes at the beginning of the year, as to whether to exclude the effect of certain specified developments that occur during the year, such as unanticipated changes in accounting principles or extraordinary, unusual or unplanned events that have been reported in our public filings, in determining the extent to which the performance objectives are met.

Where applicable, annual incentive awards are paid in March for the prior year’s performance based upon the O&C Committee’s assessment of actual performance during the prior year against the pre-established Company performance objectives. For 2011, the performance measures for annual incentive awards were based on internally-defined operating income and cash flow metrics, as noted above. The O&C Committee selected these performance metrics, with input from management, because they support the key strategies that we believe drive sustainable and profitable Company growth (as discussed under “—Executive Compensation Program Objectives and Principles” above).

All of the preliminary annual incentive award determination for each Named Executive Officer was based upon the Company’s performance against these objectives. A more in-depth description of the O&C Committee’s decisions with respect to the annual incentive awards paid to each Named Executive Officer for 2011 follows.

Setting a Target Incentive Opportunity. Each year, the O&C Committee establishes a target annual incentive opportunity for each Named Executive Officer, which is expressed as a percentage of the executive’s base salary. The target annual incentive opportunity for each Named Executive Officer in 2011 is set forth in the following table. These targets are agreed upon by the O&C Committee in consultation with LB&Co and in adherence to our stated executive compensation objectives and principles.


Named Executive Officer	2011 AIP Target %
*Mark A. Blinn*		100%
*Richard J. Guiltinan*		50%
*Thomas E. Ferguson*		70%
*Thomas L. Pajonas*		65%
*Ronald F. Shuff*		55%

Measuring Performance and Establishing Payout. Following the analysis of the Company’s performance compared against the relevant metrics for a given year, the O&C Committee establishes a payout range for each executive’s target annual incentive opportunity. The payout range ultimately determines the percentage of the target incentive to be paid, with an established upper limitation and a minimum below which no payment will be made.

The 2011 payout range established for each Named Executive Officer was 0% to 200% of his respective target award opportunity. The actual payout percentage is determined using a matrix that compares the Company’s performance against the established performance measures for the year (referred to as “plan”). The following table provides example matrix points of percentage of target award opportunity paid out at different threshold levels of Company performance against plan.


Company Performance	% of Target Payout
<80% Plan		0%
80% Plan		50%
100% Plan		100%
³125% Plan		200%

In October 2011, we acquired Lawrence Pumps Inc., a privately-held American manufacturer of highly engineered critical service centrifugal pumps used primarily in the petrochemical and oil and gas industries. Within the parameters established by the O&C Committee at the beginning of 2011, the O&C Committee decided to exclude the planned impact of the Lawrence Pumps acquisition on the performance measure achievement for 2011. In addition, the O&C Committee agreed to exclude the impact of unplanned realignment costs primarily related to the Hamburg restructuring project.

After the end of 2011, the O&C Committee reviewed the Company’s actual performance against each of the performance measures established at the beginning of the year. The O&C Committee noted that the Company performed well in 2011 in the context of uncertain economic conditions, though working capital performance, and ultimately operating cash flow, suffered from growth in inventory and accounts receivable. This was evidenced by, among other things, sales of $4.51 billion, operating income of $618.7 million, operating margin of 13.7%, and cash flows from operations of $218.2 million ($133.4 million as calculated for the annual incentive award). The O&C Committee’s earlier decision to exclude the impact of the Lawrence Pumps acquisition and unplanned realignment costs resulted in the Operating Income metric increasing by $7.4 million and the Cash Flows from Operations metric increasing by $16.8 million. Consistent with the principle of aligning awards with performance, the O&C Committee determined the target annual incentive opportunity percentage payout for each Named Executive Officer in accordance with the achievement of Company performance measures, as adjusted. As a result of this analysis, the preliminary annual incentive award percentage payout for the CEO and all other Named Executive Officers was 61.5% of their target annual incentive opportunity.

While 100% of the preliminary annual incentive award determination is based on the O&C Committee’s assessment of performance against our Company’s and divisions’ performance measures, under the Annual Incentive Plan the O&C Committee may also modify a Named Executive Officer’s award by up to 25% of actual payout based on its assessment of an individual’s contribution to our performance, as well as individual performance in relation to any extraordinary events or transactions. In this assessment, the O&C Committee considers the recommendations of the CEO as to the other Named Executive Officers. For 2011, the Board evaluated each of the Named Executive Officers based on the objectives outlined below, which were established and communicated to the Named Executive Officers at the beginning of 2011.

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Implement the Company’s strategy to deliver superior long-term shareholder value.

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Meet the 2011 business plan objectives for the Company and/or its respective business units.

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Develop and support a worldwide sustainable business model encompassing marketplace, workplace, financial structure, community and environment.

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Continue to advance the Company’s human capital programs and processes, to enhance talent acquisition, development and succession capabilities.

For 2011, the O&C Committee increased the preliminary annual incentive award payout for Mr. Pajonas based on its assessment of his performance against the aforementioned individual objectives and specific objectives that supported our key strategies (as discussed above under “—Executive Compensation Program Objectives and Principles”), as evidenced by the 2011 performance of the Flow Control Division. As a result, Mr. Pajonas’ preliminary annual incentive award payout was increased by 8.5%. No other adjustments to the preliminary annual incentive award payments were made for other Named Executive Officers. The annual incentive awards the Company paid to the Named Executive Officers for 2011 are reported below in the “Summary Compensation Table” under the “Non-Equity Incentive Plan Compensation” column.

The O&C Committee believes that the Named Executive Officers’ 2011 annual incentive awards are consistent with the Company’s strategy of rewarding its executives for the achievement of important and challenging business goals. The O&C Committee feels the annual incentive award calculations resulted in performance-related bonus annual payments to the Named Executive Officers that the O&C Committee deemed earned under objective criteria and reasonable in view of the Company’s 2011 performance.

Long-Term Incentives. Our long-term incentive program rewards the Named Executive Officers for the Company’s performance over a period of more than one fiscal year. Since 2007, our long-term incentive program has consisted of two

components: (1) restricted common stock that vests over time and (2) contingent performance shares. The O&C Committee may also award one-time grants of restricted common stock in its discretion based on performance or other factors. In 2011, all Named Executive Officers received their long-term incentive awards in these forms.

As discussed above, the O&C Committee believes that long-term incentive compensation is essential to retaining and motivating executives. The O&C Committee further believes that providing our executives with long-term incentives will encourage them to operate the Company’s business with a view towards building long-term shareholder value. Based on these considerations, the O&C Committee determined that for 2011, an equity award combination consisting of approximately one-half in value of restricted common stock and one-half in value of contingent performance shares would best serve the goals that the O&C Committee sought to achieve for 2011. The awards are granted subject to a pre-approved total target pool of restricted common stock and contingent performance share awards available to employees eligible to participate in the long-term incentive program.

Each year, the O&C Committee establishes a target long-term incentive opportunity for each Named Executive Officer, which is expressed as a percentage of the executive’s base salary. During the first quarter of each year, the O&C Committee determines the aggregate equivalent dollar value of the long-term incentive award for each Named Executive Officer and then makes annual grants of restricted common stock and contingent performance shares, as appropriate. The equity awards are made after the O&C Committee has had an opportunity to evaluate the Company’s operating results for the prior year and at the same time that the Company is making its major compensation decisions for the current fiscal year.

The O&C Committee has the discretion to increase or decrease a Named Executive Officer’s time-vested restricted common stock award (but not the contingent performance share award) based on an assessment of the officer’s individual contribution to the Company’s results and, for Named Executive Officers other than the CEO, after considering the recommendations of the CEO. Similar to potential annual incentive award adjustments, these adjustments must be based on individual performance relative to the Company’s key strategies. In addition to adjustments that may be made to the restricted common stock awards of other plan participants based on individual performance, awards will not be granted in the aggregate in excess of the pre-approved total target pool available for restricted stock awards by more than 10% without specific O&C Committee consideration. In 2011, the O&C Committee did not adjust the time-vested restricted common stock awards for any Named Executive Officer based on individual contribution.

In determining the aggregate equivalent dollar value available for individual long-term incentive awards, and the aggregate amount of total awards available for our executives, the O&C Committee considers both the target dollar value of the long-term incentive package and the package’s potential dilutive effect on the Company’s outstanding shares of common stock. The O&C Committee first sets the target dollar value of the long-term incentive package for each Named Executive Officer and, in doing so, considers durable-goods manufacturing companies data from the Hewitt Survey and information from the Company’s HPPG, as previously described. For reasons described above under “—Executive Compensation Program Objectives and Principles—Compensation Levels Should be Market Competitive”, we generally provide, and in 2011 did provide, long-term incentive awards at target levels that approximate an average of the 50th percentile of the HPPG and the 75th percentile of the broad market taken from the Hewitt Survey, based on the O&C Committee’s review of HPPG materials and data provided management, which is reviewed by LB&Co.

Once the target dollar value is set as described above, the O&C Committee considers the potential dilutive effect of awards on the Company’s outstanding shares of common stock. The O&C Committee evaluates shareholder dilution based on equity compensation “burn rates,” which refers to the annual rate at which shares are awarded under our shareholder approved stock compensation plans compared to the total amount of the Company’s outstanding common stock. The O&C Committee then compares the rate to those of the companies in the HPPG, guidelines used by certain institutional shareholder advisory services and the advice of LB&Co. Generally, the O&C Committee targets a maximum Company-wide “burn rate” of 1.0% of the Company’s outstanding common stock for each annual grant of long-term incentive awards for all Company employees. Based on projections of equity awards to be made to employees during the balance of 2011, the O&C Committee determined that the proposed awards to the Named Executive Officers and the projected additional awards to employees would enable the Company to remain comfortably within the annual “burn rate” of 1.0% of the Company’s outstanding common stock.

In past years, the O&C Committee has established the practice of annually approving and granting equity awards to long-term incentive plan participants at the O&C Committee’s meeting held in the first quarter of the year. Based on the criteria described above, the O&C Committee met on February 10, 2011 and approved the target long-term incentive opportunities for our Named Executive Officers as set forth in the table below:


Named Executive Officer	2011 LTI Target as % of Base Salary
*Mark A. Blinn*		375%
*Richard J. Guiltinan*		150%
*Thomas E. Ferguson*		230%
*Thomas L. Pajonas*		185%
*Ronald F. Shuff*		175%

The material terms and conditions of these equity awards are determined under the provisions of our equity compensation plans that were approved previously by our shareholders. These plans are included as exhibits to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on February 22, 2012 (the “Annual Report”), which can be found on the Company’s website at www.flowserve.com under the “Investor Relations—SEC Filings” caption.

Restricted Common Stock Awards. Since 2004, the O&C Committee has granted restricted common stock awards that vest ratably over time to deliver a meaningful long-term incentive that balances risk and potential reward. These awards also serve as an effective incentive for our superior executive performers to remain with the Company and continue such performance.

Target restricted common stock grants to the Named Executive Officers in 2011 represented one-half of the executives’ total target long-term incentive opportunity. Target grants were determined by dividing this portion of the executive’s long-term incentive opportunity by the price of the Company’s common stock, which was calculated by taking an average of closing prices reported on the NYSE during the last twenty trading days of 2010.

Restricted common stock awards are only earned if the individual continues to be employed by the Company until the applicable vesting dates of the awards. During the restriction periods, the Named Executive Officers holding unvested restricted common stock are entitled to vote the shares and to receive dividends on the shares, if any, on the same basis as the Company’s shareholders holding unrestricted stock.

The grant date fair value of the restricted common stock awards granted to the Named Executive Officers during 2011, calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation,” are shown in the “Summary Compensation Table” under the “Stock Awards” column and the accompanying footnotes. Additional information on the awards granted in 2011 is shown in the “2011 Grants of Plan-Based Awards” table.

Contingent Performance Share Awards. Contingent performance shares are restricted stock units that vest, if at all, based on the Company’s achievement of pre-determined financial metrics, measured over a three-year performance period, in relation to the HPPG’s achievement of these same financial metrics at the time of measurement. The O&C Committee believes that these performance-based awards, as compared to restricted common stock awards that vest ratably over time, provide a stronger incentive for our executives to achieve specific performance goals over the performance period that advance our business strategies, build long-term shareholder value and encourage executive retention.

These performance-based awards are subject to forfeiture if the executive’s employment terminates for any reason other than death, disability, retirement or reduction-in-force before the end of the three-year performance period or if the performance goals are not reached. Until vesting, holders of contingent performance share units do not have voting rights on the units, but the units are entitled to receive dividend accruals, if any.

Target contingent performance share grants to the Named Executive Officers in 2011 represented one-half of the executives’ total target long-term incentive opportunity. As with the restricted common stock grants, target grants were determined by dividing this portion of the executive’s long-term incentive opportunity by the price of the Company’s common stock, which was calculated by taking an average of closing prices reported on the NYSE during the last twenty trading days of 2010.

In 2011, the O&C Committee approved contingent performance share long-term incentive opportunities that will vest, if at all, in March 2014 based on the Company’s achievement of a three-year RONA performance relative to the HPPG’s RONA performance (as more fully described below). The O&C Committee currently believes that the RONA financial measure is well correlated to shareholder value creation. The O&C Committee also believes that tying vesting amounts to comparisons with the HPPG, rather than the market in general, will help ensure that performance is measured in a more transparent manner and will not benefit disproportionately from general market movement.

Prior to the granting of contingent performance share awards each year, the O&C Committee establishes a vesting percentage range around each executive’s target long-term incentive opportunity allocated to the contingent performance shares that is based on the Company’s RONA performance relative to the HPPG. This vesting percentage range has an established upper limitation and a minimum below which no shares will vest. Similar to the annual cash incentive awards, the percentage vesting range ultimately determines the amount of contingent performance shares that actually vest relative to the original award amount.

For 2011, the vesting percentage range established for each Named Executive Officer was 0% to 200% of his respective target long-term incentive opportunity allocated to the contingent performance shares. In order to achieve a target (100%) vesting percentage, the Company must achieve an average RONA over the three-year performance period equivalent to the median (50th percentile) three-year RONA average among the members of the HPPG. To illustrate, if the median RONA average among the HPPG over the three-year performance period was 15.0%, then the Company would have to achieve a 15.0% RONA over the performance period to achieve a target vesting percentage. The O&C Committee believes that using the individual RONA averages of the HPPG’s members works to mitigate the influence of outlier RONA performances within the group, which can skew the aggregate RONA average either positively or negatively, and results in a more consistent basis for assessing relative performance.

The following table illustrates the vesting percentage of the contingent performance shares granted in 2011 at different levels of Company RONA performance relative to the percentile of the HPPG’s three-year RONA averages.


Company RONA Performance v. Percentile of HPPG RONA Performance	Target Vesting %
<85% of HPPG RONA Averages Median		0%
85% of HPPG RONA Averages Median		50%
HPPG RONA Averages Median		100%
HPPG RONA Averages 75th Percentile		200%

Stock Ownership Requirements and Anti-Hedging. The executive compensation program requires that our executives own a minimum amount of Company common stock equal in value to a multiple of their respective annual base salaries. The O&C Committee believes that this ownership requirement further encourages the alignment of executive and shareholder interests by requiring executives to acquire and maintain a meaningful stake in the Company, which promotes the Company’s objective of building long-term shareholder value. Additionally, under the Company’s Insider Trading Policy, which is available on our website at www.flowserve.com under the “Investor Relations—Governance” caption, executives are prohibited from engaging in transactions (such as trading in options) designed to hedge against the value of the Company’s common stock.

The stock ownership requirements are designed to maintain stock ownership at levels high enough to indicate management’s commitment to share value appreciation to our shareholders while satisfying an individual executive’s prudent needs for personal asset diversification. The stock ownership requirements are set by the O&C Committee as a result of a competitive analysis prepared by management and reviewed by LB&Co, and the requirements are reviewed each year and updated as necessary. The requirements were last reviewed by the O&C Committee in 2011.

The Company’s current stock ownership requirements for the Named Executive Officers and the number of shares required thereby are shown in the following table.


Named Executive Officer	Ownership Requirement		Required Ownership at 12/31/2011 (# of Shares)⁽¹⁾
*Mark A. Blinn*		5 x Annual Base Salary		47,965
*Richard J. Guiltinan*		3 x Annual Base Salary		11,635
*Thomas E. Ferguson*		3 x Annual Base Salary		15,684
*Thomas L. Pajonas*		3 x Annual Base Salary		14,889
*Ronald F. Shuff*		3 x Annual Base Salary		12,972

(1)

Based on an average price per share of $98.51, which is calculated using the average closing prices of our common stock between May 1st and October 31st of 2011, as reported by the NYSE. Shares have been rounded up to the nearest whole share.

The required stock ownership levels are expected to be achieved within five years from the date the guidelines are first applicable or within five years of the executive joining the Company. Recognizing the time required to achieve the ownership requirements, the O&C Committee approved the establishment of an interim retention requirement. Through this requirement, executives who do not meet the ownership requirement must show that they have retained at least 60% of the vested restricted common stock, vested contingent performance shares and exercised stock options granted from the time the ownership guidelines become applicable. For 2011, all Named Executive Officers met their stock ownership requirements except for Mr. Guiltinan, who retired on March 31, 2012.

The O&C Committee annually reviews these stock ownership requirements and periodically monitors the executives’ progress toward meeting their respective target ownership levels. Shares held directly by an executive count toward satisfying the requirements. The share equivalent of vested and unexercised stock options and shares held in the Flowserve Corporation Non-Qualified Deferred Compensation Plan also count toward satisfying the stock ownership requirements. Unvested restricted common stock and unvested contingent performance shares are not counted toward satisfying the stock ownership requirements.

Recoupment of Incentive Compensation Policy. At the beginning of 2011, the O&C Committee adopted a Recoupment of Incentive Compensation Policy (the “Recoupment Policy”) to reinforce our commitment to integrity and the highest standards of ethical conduct through our compensation program. Under the Recoupment Policy, the O&C Committee has the ability to recoup certain incentive compensation from an executive if the Company is required to restate its financial statements or if the executive engages in misconduct. If a restatement occurs, the O&C Committee can require an executive to reimburse the Company for (1) compensation received under our Annual Incentive Plan and (2) vested contingent performance shares, where the amount of compensation received, in either case, was greater than the amount the O&C Committee believes was actually earned based on the restated financial results. If an executive engages in misconduct, the O&C Committee can require the executive to repay the gross value of (1) all compensation received under the Annual Incentive Plan during the calendar year(s) in which the misconduct occurred, (2) all vested restricted common stock granted during the calendar year(s) in which the misconduct occurred and (3) all vested contingent performance shares awarded to the executive for any performance period that includes the calendar year(s) in which the misconduct occurred.

Flowserve Corporation Pension Plans. We provide pension benefits to U.S. salaried employees under the Flowserve Corporation Pension Plan (the “Qualified Plan”), which is a tax-qualified pension plan, subject to funding requirements, vesting rules and maximum benefit limitations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Named Executive Officers participate in the Qualified Plan on the same terms as the rest of our U.S. salaried employees. Because the Internal Revenue Code of 1986, as amended (the “Code”), limits the pension benefits (based on an annual compensation limit) that can be accrued under a tax-qualified pension plan, we established and maintain a partially funded, non-qualified defined benefit restoration pension plan, the Senior Management Retirement Plan (the “SMRP”), for our executives, including the Named Executive Officers, to compensate these individuals for the reduction in their pension benefit resulting from this limitation. The SMRP is purely a restoration plan to provide comparable level

retirement benefits to those provided to other U.S. employees based on a comparable benefit formula. In addition, we also established and maintain a second partially-funded, non-qualified supplemental defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”), for our eligible U.S. executives, including the Named Executive Officers, to maintain a total retirement benefit level that is competitive with general industry companies similar in size. These programs are designed to provide eligible U.S. executives with income following retirement and to help ensure that we are able to attract and retain executive talent by providing comprehensive retirement benefits.

Participants in the Qualified Plan and the SMRP accrue contribution credits based on age and years of service at the rate of 3% to 7% for eligible earnings up to the Social Security wage base, and at the rate of 6% to 12% for eligible earnings in excess of the Social Security wage base. Participants in the SERP accrue contribution credits at the rate of 5% of all eligible earnings. Eligible earnings include base salary and annual incentive award. SERP participants also earn interest on the accrued cash balance based on the rate of return on 10-year Treasury bills, with the exception of Mr. Ferguson who, because of his age and service as of July 1, 1999, was provided a guaranteed interest rate under a “grandfather” provision applicable to similarly situated U.S. salaried employees.

Our Qualified Plan also confers competitive post-employment benefits to the executive officers upon a change-in-control. The additional years of credited service and additional age credit for purposes of determining an individual’s benefits under the Qualified Plan compensate that individual upon his or her early termination from the plan.

The actuarial present value of the accumulated pension benefits of the Named Executive Officers as of the end of 2011, as well as other information about the Company’s defined benefit pension plans, is shown in the “2011 Pension Benefits” table below. For a discussion regarding the valuation method and assumptions used in quantifying the present value of the current accrued pension benefits, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Pension and Postretirement Benefits Obligations—Accrual Accounting and Significant Assumptions” in the Company’s Annual Report.

Review and Assessment of Compensation Under Termination Scenarios. The O&C Committee also reviews each Named Executive Officer’s total compensation under several scenarios including a change-in-control of the Company, termination of employment by management and resignation or retirement by the executive. Tally sheets setting forth all of the listed scenarios are prepared by management and reviewed by the O&C Committee with input from LB&Co. Based on the O&C Committee’s review of the tally sheets, the O&C Committee determined that the potential payments that would be provided to the Named Executive Officers were consistent with our executive compensation objectives and principles.

Flowserve Corporation Officer Severance Plan. In 2006, the Board and the O&C Committee approved, and the Company adopted, a revised severance plan for the Company’s senior executive officers and other corporate officers, which was amended and restated in 2010 (the “Officer Severance Plan”). The O&C Committee currently believes that the Officer Severance Plan is a competitive compensation element in the current executive labor market and is more beneficial to the Company and its shareholders than conducting individual negotiations with each executive officer in the event of a termination of employment.

In addition, to protect the Company’s competitive position, each executive is required to sign an agreement with the Company that requires the executive to forfeit the proceeds from a portion of the executive’s long-term incentive awards if the executive engages in conduct that is detrimental to the Company. Detrimental conduct includes working for certain competitors, soliciting customers or employees after employment ends and disclosure of confidential information in a manner that may result in competitive harm to the Company.

Detailed information concerning the Officer Severance Plan, including the events that trigger benefits and the severance benefits provided upon the occurrence of such events, is discussed below under “—Potential Payments Upon Termination or Change-in-Control—Flowserve Corporation Officer Severance Plan.”

Flowserve Corporation Executive Officer Change-in-Control Severance Plan. The Flowserve Corporation Executive Change-in-Control Severance Plan (the “CIC Plan”) provides certain specified severance benefits to the Named Executive Officers to promote financial protection and security of their long-term incentive compensation

arrangements in the event of the loss of their positions following a transaction that involves a change in the ownership or control of the Company. The benefits under the CIC Plan, if payable, are in lieu of severance benefits payable to executive officers under the Officer Severance Plan described above.

The O&C Committee believes that it is in the best interests of the Company and its shareholders to offer such a plan to its Named Executive Officers and other executives. The Company competes for executives in a highly competitive market in which companies routinely offer similar benefits to senior employees. The O&C Committee views these amounts as reasonable and appropriate for the Named Executive Officers, who may not be in a position to obtain comparable employment following a change-in-control. The O&C Committee also believes that these benefits are important to encourage executives to support a change-in-control transaction if the Board deems the transaction to be in the best interest of our shareholders.

Severance benefits under the CIC Plan include, among other things, the accelerated vesting of all outstanding equity awards in connection with a change-in-control of the Company (without a requirement that the Named Executive Officer’s employment be terminated). In the O&C Committee’s view, this is currently a customary and reasonable component of a comprehensive change-in-control benefits program plan, but the O&C Committee will continue to review this matter. The O&C Committee believes that the equity awards granted to our executives have been reasonable in amount and are a substantial part of the value that would be received by them in the event of a change-in-control of the Company, in lieu of benefiting from the likely future increase in the price of our common stock over the years. The O&C Committee believes that accelerating vesting is appropriate, since the current executive team’s performance would have been responsible for this anticipated share price increase and benefit to future shareholder value.

The O&C Committee, in consultation with LB&Co, reviews the CIC Plan periodically to evaluate both its effectiveness and competitiveness and to determine the value of potential awards.

Detailed information concerning the CIC Plan, including the events that trigger benefits and the severance benefits provided upon the occurrence of such events, is discussed below under “—Potential Payments Upon Termination or Change-in-Control—Flowserve Corporation Executive Officer Change-in-Control Severance Plan.”

Other Benefits. As previously discussed, the O&C Committee strives to make our executive compensation program primarily performance-based and, as such, has eliminated perquisites for our executive officers. Our executive compensation program continues to provide limited other benefits, which the O&C Committee believes are competitive with the level of benefits offered by the companies with which we compete for executive talent, and as such serve to meet our stated objective of attracting and retaining executive talent. In addition, some of the benefits are, in the O&C Committee’s view, provided for the Company’s benefit notwithstanding any personal benefit an executive may derive. Such other benefits provided in 2011 included:

•

Executive Physicals. All Named Executive Officers were eligible to receive an annual physical examination. This is a standard benefit provided by comparative companies.

•

Enhanced Vacation. All Named Executive Officers are eligible to receive an enhanced vacation benefit. Each officer is eligible for a minimum of four weeks vacation and may receive more, if the officer’s years of service so qualify under the Company’s regular employee vacation award schedule.

The aggregate incremental cost of providing these benefits to the Named Executive Officers is included in the “Summary Compensation Table” under the “All Other Compensation” column and related footnotes.

Non-Qualified Deferred Compensation Plan. Prior to 2008, the Flowserve Corporation Deferred Compensation Plan (the “Deferral Plan”) was available to all U.S. employees who met the IRS definition of a “highly compensated employee.” The Deferral Plan allowed eligible participants, including the Named Executive Officers, to elect, at their discretion, to defer payment of a portion of their salary and all or a portion of their annual incentive award and to have these deferred amounts treated as if invested in specified hypothetical investment benchmarks. Participants are entitled to direct the manner in which their deferral accounts will be deemed to be invested by selecting among hypothetical investment

benchmarks chosen by the Pension and Investment Committee, the administrators of the Deferral Plan. Generally, there are no vesting requirements on deferred amounts or earnings on deferred amounts. The Company did not make any contributions to the plan.

Effective December 31, 2007, the Deferral Plan was frozen. Accordingly, no deferrals have been made by any executives, including the Named Executive Officers, since that time, and no further deferrals may be made. Existing participant account balances will remain within the Deferral Plan and remain subject to future appreciation or depreciation until the balances are distributed based on the participant’s distribution election.

With respect to amounts deferred prior to December 31, 2004, participants may voluntarily elect to withdraw all of the balance in their accounts. If a participant elects to withdraw such amounts, the Company will pay an amount equal to 90% of the balance in the participant’s deferral account in a lump sum in cash, and the participant will forfeit the remainder of such deferral account. With respect to amounts deferred after December 31, 2004, participants may not voluntarily elect to withdraw any portion of the balance in their accounts.

In prior years, executives may have deferred significant amounts of their salary and annual incentive awards, which minimized the reduction in the federal income tax deduction available to the Company, as the compensation deferred was not subject to the limitation under Section 162(m) of the Code until the year paid. Total deferral account balances as of the end of 2011 are shown in the “2011 Non-Qualified Deferred Compensation” table below.

Additional Executive Compensation Information

Employment Agreements. Consistent with its compensation philosophy, the Company generally does not enter into employment agreements with its executives, who are considered to serve at the will of the Board. The only exception to this policy is the individual letter agreement with the current CEO, Mark A. Blinn.

In connection with Mr. Blinn’s appointment as President and CEO in 2009, the Company entered into a letter agreement with Mr. Blinn, dated August 31, 2009. The letter agreement provides that Mr. Blinn’s previous employment agreement with the Company dated May 7, 2007, as amended, was terminated effective October 1, 2009, and Mr. Blinn’s employment with the Company thereafter is on an at-will basis. The letter agreement sets forth preliminary compensatory terms relating to Mr. Blinn’s new position (which have since been modified in the ordinary course of the O&C Committee’s annual executive compensation review process) and states Mr. Blinn will participate or continue to participate in the Company’s various compensation and benefit programs to the extent he is eligible.

Mr. Blinn, along with all other executive officers, participates in the Officer Severance Plan and in the CIC Plan.

Tax and Accounting Implications of Executive Compensation. Section 162(m) of the Code limits to $1.0 million per year the federal income tax deduction to public corporations for compensation paid for any fiscal year to the Company’s CEO and the three other most highly-compensated executive officers as of the end of the fiscal year included in the “Summary Compensation Table,” unless such compensation meets certain requirements. Approximately $2.1 million will be subjected to this limitation for the 2011 tax year and will therefore not be deductible on the Company’s federal income tax return.

The cash-based Annual Incentive Plan was approved by shareholders at the 2007 annual meeting of shareholders. Performance-based compensation will be deductible for tax purposes based on the payments that are anticipated to be made as a result of performance relating to the Annual Incentive Plan.

Stock options under our existing plans are intended to comply with the rules under Section 162(m) for treatment as performance-based compensation. Therefore, we expect to be allowed to deduct compensation related to options granted under each of these plans.

The equity based long-term incentive program has been revised to comply with the rules under Section 162(m) and was approved at the 2007 annual meeting of shareholders. We expect to be allowed to deduct performance-based compensation granted under the equity-based long-term incentive program, including the contingent performance shares, beginning with the grants awarded in 2007. These grants became eligible for pay-out beginning in 2010, and therefore should be deductible for tax purposes in 2011.

The O&C Committee has considered and will continue to consider tax deductibility in structuring executive compensation arrangements. However, the O&C Committee retains discretion to establish executive compensation arrangements that it believes are consistent with its principles described earlier and in the best interests of the Company and our shareholders, even if those arrangements are not fully deductible under Section 162(m).

The Company recognizes compensation expense in our financial statements for all equity-based awards pursuant to the principles set forth in FASB ASC 718, “Compensation—Stock Compensation”. The O&C Committee considered the GAAP accounting implications of the awards in setting the long-term incentive mix and further determined that the mix of time-vested restricted common stock and contingent performance shares was appropriate for 2011.

Chief Executive Officer Compensation in 2011. While the compensation of the CEO was set in a manner consistent with our compensation philosophy and the general compensation objectives and principles discussed above, in the interests of providing shareholders with a better understanding of Mr. Blinn’s compensation for 2011, we are providing the following discussion and analysis.

In February 2011, the O&C Committee identified specific criteria for evaluating the CEO’s performance during 2011. These criteria included financial performance, strategic vision and leadership, including the development of human capital. In evaluating the CEO’s performance in 2011, the O&C Committee Chairman gathered input from individual Board members during the Board’s special executive session. During this session, the O&C Committee reviewed both the detailed compensation market data prepared by our Company’s compensation consultant and LB&Co. The O&C Committee discussed and determined the below CEO compensation changes and awards in executive session with only O&C Committee members and LB&Co present. The O&C Committee also followed the principles and practices earlier discussed during the Board’s special executive session to conduct the CEO performance review.

The O&C Committee reviews the CEO’s total compensation package on an annual basis and analyzes it in view of competitive data provided by management and reviewed by LB&Co, pay equity relative to the other Named Executive Officers and the Company’s performance for the fiscal year. The O&C Committee plans to continue to annually disclose its CEO’s and Named Executive Officers’ compensation adjustments and awards, including the rationale for these actions, in future proxy statements.

Base Salary. In February 2011, Mr. Blinn’s salary was increased from $917,500 to $945,000, representing an increase of 3.0% over 2010. This increase was consistent with the base salary increase guidelines used across the whole organization and represented the Board’s recognition of Mr. Blinn’s performance during the year against his objectives.

Annual Incentive Opportunity. To recognize Mr. Blinn’s performance during 2011, the O&C Committee approved a cash award under the Annual Incentive Plan of $581,175. As discussed under “—Elements of the Executive Compensation Program—Annual Incentive Opportunity—Measuring Performance and Establishing Payout” above, the actual payout represented 61.5% of Mr. Blinn’s target annual incentive opportunity.

Long-Term Incentives. In accordance with the principles and practices set forth earlier, the O&C Committee approved an initial long-term incentive award to Mr. Blinn consisting of 14,790 shares of restricted common stock, which vest ratably over time, and 14,790 contingent performance units at the same time 2011 long-term incentive awards were made to key managers, including the Named Executive Officers.

Annual Executive Compensation Program Review and Compensation Risk

It is the O&C Committee’s policy to regularly monitor and annually review our executive compensation program to determine, in consultation with LB&Co, whether the elements of the program are consistent with our stated executive compensation objectives and principles. Within this determination is an evaluation of whether the Company’s risk management objectives are being met with respect to the executive compensation program and our compensation programs as a whole. If the elements of the program are determined to be inconsistent with our objectives and principles, or if any incentives are determined to encourage risks that are reasonably likely to have a material adverse effect on us, the elements are adjusted as necessary.

Following the O&C Committee’s annual review of our executive and other compensation programs in 2011, in consultation with LB&Co, the O&C Committee concluded that no risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company. In reaching this conclusion, the O&C Committee noted that:

•

Our compensation program design provides a balanced mix of base salary, annual cash incentive compensation and, for eligible employees, long-term equity incentives, which provides the incentive to perform at high levels and maximize Company performance without focusing exclusively on compensation performance metrics to the detriment of other important business metrics;

•

Our incentive compensation metrics are balanced between the realization of short-term corporate business and financial objectives, namely annual operating income and cash flows from operations for the annual cash incentive opportunity, and long-term stock-based and financial performance objectives, which are effected through an equally weighted mix of restricted common stock that generally vests ratably over a three-year period and contingent performance shares that vest at the end of a three-year performance period based on indexed RONA performance;

•

We place an emphasis on individual, non-financial performance metrics in determining final individual compensation amounts, serving to restrain the influence of formulae and objective factors on incentive pay and providing the O&C Committee with discretion to adjust compensation downward if behaviors are not consistent with our business objectives and values;

•

Maximum payout levels for the annual cash incentive opportunity are capped at 200% of target, with a maximum additional 25% adjustment for individual performance, and the contingent performance share award payouts are capped at 200% of target, which helps avoid excessive total compensation and reduces the incentive to engage in unnecessarily risky behavior;

•

The annual cash incentive opportunity and the contingent performance share awards have threshold payout levels, which ensure that incentive compensation is reduced or eliminated altogether if minimum performance levels are not achieved;

•

Our officers are subject to equity ownership guidelines, which further encourage a long-term focus on sustainable performance and further align our officers’ interests with those of our shareholders, and are prohibited from engaging in transactions designed to hedge against the value of the Company’s stock;

•

The Company maintains a Recoupment of Incentive Compensation Policy allowing for the “clawback” of certain incentive compensation in the event of a financial restatement or misconduct; and

•

Our Annual Incentive Plan and our long term incentive program are the same for all eligible employees and have been in place and structured around the same metrics for several years, and we have seen no evidence that they encourage unnecessary or excessive risk-taking.

Following the 2011 annual review of our executive compensation program, the O&C Committee, in consultation with LB&Co, concluded that all elements of the executive compensation program are consistent with our executive compensation objectives and principles, and made no significant changes to our executive compensation program.

Organization and Compensation Committee Report

The Organization and Compensation Committee of the Board of Directors of the Company is currently comprised of five independent directors, William C. Rusnack (Chairman), Roger L. Fix, John R. Friedery, Charles M. Rampacek and David E. Roberts.

The Organization and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis, set forth above in this proxy statement, with management. Based on this review and discussion, the Organization and Compensation Committee recommended to the Board of Directors that this Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2011.

William C. Rusnack, Chairman

Roger L. Fix

John R. Friedery

Charles M. Rampacek

David E. Roberts

Summary Compensation Table

The following table sets forth compensation information for 2011, 2010 and 2009 for our Named Executive Officers — the individuals who served during 2011 as principal executive officer and principal financial officer of the Company and the three other most highly compensated executive officers of the Company serving at the end of 2011.


Name and Principal Position	Year		Salary ($)⁽¹⁾		Stock Awards ($)⁽²⁾			Non-Equity Incentive Plan Compensation ($)⁽³⁾		Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($)⁽⁴⁾		All Other Compensation ($)⁽⁵⁾		Total ($)
*Mark A. Blinn*		2011		937,240		3,905,447	⁽⁶⁾		581,175		303,306		69,030		5,796,199
President and Chief		2010		910,346		2,807,066			846,853		252,748		61,203		4,878,216
Executive Officer		2009		652,139		1,009,174			830,817		199,933		85,064		2,777,127
(Principal Executive Officer)
*Richard J. Guiltinan*⁽⁷⁾		2011		380,153		504,635	⁽⁸⁾		117,473		96,792		35,715		1,134,768
Former Senior VP Finance		2010		373,284		559,878			172,848		108,531		34,278		1,248,819
and Chief Accounting Officer		2009		364,043		391,902			283,044		119,561		40,135		1,198,685
(Principal Financial Officer)
*Thomas E. Ferguson*⁽⁹⁾		2011		512,692		1,292,996	⁽¹⁰⁾		221,707		264,304		59,797		2,351,497
Former Senior VP and		2010		494,917		1,935,915			323,050		269,784		56,747		3,080,413
President of Flow		2009		465,000		1,189,818			470,722		269,104		44,961		2,439,605
Solutions Group
*Thomas L. Pajonas*		2011		487,417		997,229	⁽¹¹⁾		212,046		140,735		49,086		1,886,513
Senior VP and Chief		2010		477,407		1,523,892			265,439		159,183		49,768		2,475,689
Operating Officer		2009		465,000		918,418			433,845		186,536		46,985		2,050,784
*Ronald F. Shuff*⁽¹² ⁾		2011		424,660		821,864	⁽¹³⁾		144,076		222,862		40,075		1,653,537
Senior VP and General		2010		416,230		686,047			192,719		228,406		41,067		1,564,469
Counsel

(1)	Salary reported for 2011 represents amounts earned by the executive officers in 2011.

(2)

Represents the grant date fair value of long-term equity incentive awards under the Company’s long-term incentive program computed in accordance with FASB ASC 718 “Compensation—Stock Compensation”. The incentive awards are granted in the form of restricted common stock, which generally vest ratably over a three-year period, and contingent performance share units. The performance criteria for the contingent performance share awards is based on the Company’s average RONA over a three-year period compared to the RONA averages of the Company’s applicable HPPG for the same period, as described in further detail under “—Elements of the Executive Compensation Program—Long-Term Incentives—Contingent Performance Share Awards” above. The reported value of the contingent performance awards is computed based on the grant date estimate of compensation cost to be recognized over the three-year period, which was 100%, or “target”. Payout for the contingent performance awards can range from 0 shares to a maximum of 200% of target. Assumptions used in the valuations are discussed in Note 5 to the Company’s audited consolidated financial statements for the year ended December 31, 2011 in the Annual Report.

(3)

The 2011 amounts in this column represent an annual cash incentive bonus for 2011 under the Company’s Annual Incentive Plan that was earned in 2011. These amounts were accrued in the Company’s 2011 financial statements but were not actually paid to Messrs. Blinn, Guiltinan, Ferguson, Pajonas and Shuff until March 2012.

(4)	There were no above-market or preferential earnings with respect to any deferred compensation balances.

(5)	The following table shows the components of this column for the Named Executive Officers, calculated at the aggregate incremental cost to the Company:


Name	Retirement Plan Contributions		Insurance Premiums^(A)		Dividends on Restricted Stock		Other			Total
*Mark A. Blinn*	$	11,025	$	20,795	$	33,237	$	3,974	^(B)	$	69,030
*Richard J. Guiltinan*		11,025		16,799		6,832		1,059	^(C)		35,715
*Thomas E. Ferguson*		11,025		14,482		33,134		1,156	^(C)		59,797
*Thomas L. Pajonas*		11,025		15,892		22,169		—			49,086
*Ronald F. Shuff*		11,025		18,176		10,793		81	^(C)		40,075

(A)

Includes annual premiums for group term life insurance, the Company’s portion of annual premiums for medical, dental and vision benefits and the Company’s portion of disability premiums.

(B)

Includes $2,500 attributable to an annual physical exam and $1,474 attributable to spousal travel.

(C)

Attributable to spousal travel.

(6)

Calculated using a price per share of $132.03, the closing market price of the Company’s common stock as reported by the NYSE on February 11, 2011, the date of grant. Includes 14,790 shares ($1,952,724) of restricted stock and 14,790 contingent performance units ($1,952,724), which represents the target award. The maximum potential value of the performance award, assuming the highest level of performance conditions, is 29,580 shares, or $3,905,447 at the date of grant.

(7)	Mr. Guiltinan retired from his positions with the Company effective March 31, 2012.

(8)

Calculated using a price per share of $130.87, the closing market price of the Company’s common stock as reported by the NYSE on February 10, 2011, the date of grant. Includes 1,928 shares ($252,317) of restricted stock and 1,928 contingent performance units ($252,317), which represents the target award. The maximum potential value of the performance award, assuming the highest level of performance conditions, is 3,856 shares, or $504,635 at the date of grant.

(9)	Mr. Ferguson transitioned from his role with the Company effective January 9, 2012.

(10)

Calculated using a price per share of $130.87, the closing market price of the Company’s common stock as reported by the NYSE on February 10, 2011, the date of grant. Includes 4,940 shares ($646,498) of restricted stock and 4,940 contingent performance units ($646,498), which represents the target award. The maximum potential value of the performance award, assuming the highest level of performance conditions, is 9,880 shares, or $1,292,996 at the date of grant.

(11)

Calculated using a price per share of $130.87, the closing market price of the Company’s common stock as reported by the NYSE on February 10, 2011, the date of grant. Includes 3,810 shares ($498,615) of restricted stock and 3,810 contingent performance units ($498,615), which represents the target award. The maximum potential value of the performance award, assuming the highest level of performance conditions, is 7,620 shares, or $997,229 at the date of grant.

(12)	Mr. Shuff’s 2009 compensation amounts are not included, as he was not a Named Executive Officer during that year.

(13)

Calculated using a price per share of $130.87, the closing market price of the Company’s common stock as reported by the NYSE on February 10, 2011, the date of grant. Includes 3,140 shares ($410,932) of restricted stock and 3,140 contingent performance units ($410,932), which represents the target award. The maximum potential value of the performance award, assuming the highest level of performance conditions, is 6,280 shares, or $821,864 at the date of grant.

2011 Grants of Plan-Based Awards

The following table sets forth certain information with respect to 2011 plan-based awards granted to the Named Executive Officers for the year ended December 31, 2011.


Name	Grant Date			Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards⁽¹⁾						All Other Stock Awards: Number of Shares of Stock or Units (#)			Grant Date Fair Value of Stock and Option Awards ($)⁽²⁾
Name	Grant Date			Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)
*Mark A. Blinn*		2/11/2011	⁽³⁾		472,500		945,000		1,890,000		—		—		—		—			—
		2/11/2011			—		—		—		7,395		14,790		29,580		—			1,952,724	⁽⁴⁾
		2/11/2011			—		—		—		—		—		—		14,790	⁽⁵⁾		1,952,724
*Richard J. Guiltinan*		2/10/2011	⁽³⁾		95,507		191,013		382,026		—		—		—		—			—
		2/10/2011			—		—		—		964		1,928		3,856		—			252,317	⁽⁴⁾
		2/10/2011			—		—		—		—		—		—		1,928	⁽⁵⁾		252,317
*Thomas E. Ferguson*		2/10/2011	⁽³⁾		180,250		360,500		721,000		—		—		—		—			—
		2/10/2011			—		—		—		2,470		4,940		9,880		—			646,498	⁽⁴⁾
		2/10/2011			—		—		—		—		—		—		4,940	⁽⁵⁾		646,498
*Thomas L. Pajonas*		2/10/2011	⁽³⁾		158,890		317,779		635,558		—		—		—		—			—
		2/10/2011			—		—		—		1,905		3,810		7,620		—			498,615	⁽⁴⁾
		2/10/2011			—		—		—		—		—		—		3,810	⁽⁵⁾		498,615
*Ronald F. Shuff*		2/10/2011	⁽³⁾		117,120		234,240		468,480		—		—		—		—			—
		2/10/2011			—		—		—		1,570		3,140		6,280		—			410,932	⁽⁴⁾
		2/10/2011			—		—		—		—		—		—		3,140	⁽⁵⁾		410,932

(1)

The number of shares listed represents long-term equity incentive awards in the form of contingent performance share units under the Company’s long-term incentive program. The performance criteria for these awards is based on the Company’s average RONA over the three-year period ending December 31, 2013 compared to the RONA averages of the Company’s HPPG for the same period, as described in further detail under “—Elements of the Executive Compensation Program—Long-Term Incentives—Contingent Performance Share Awards” above.

(2)	These amounts represent the fair value, as determined under FASB ASC Topic 718, of the stock awards based on the grant date fair value estimated by the Company for financial reporting purposes.

(3)

Under the Annual Incentive Plan, the primary performance measures are internally defined metrics based on operating income and cash flow. Actual amounts payable under the Annual Incentive Plan, if payable, can range from 50% (Threshold) to 200% (Maximum) of the target amounts for the Named Executive Officers based upon the extent to which performance under the foregoing criteria meets, exceeds or is below the target and can be further increased or decreased based on achievement of individual performance objectives. Actual payout for 2011 was 61.5% of the target amount.

(4)

Represents the fair value on the date of grant, as described in footnote (2), of the “target” award. During the performance period, as described in footnote (1), earned and unearned compensation expense is adjusted based on changes in the expected achievement of the performance targets. As of December 31, 2011, the Company estimated vesting of, and therefore expensed, this award at 124.2% of the “target” award based on expected achievement of performance targets.

(5)	The amounts shown reflect the numbers of shares of restricted common stock granted to each Named Executive Officer pursuant to the Flowserve Corporation Equity and Incentive Compensation Plan.

Outstanding Equity Awards at Year-End 2011

The following table sets forth certain information with respect to outstanding equity awards as of December 31, 2011 with respect to the Named Executive Officers.


Name	Option Awards						Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock that Have Not Vested (#)			Market Value of Shares or Units of Stock that Have Not Vested⁽¹⁾ ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested⁽¹⁾ ($)
*Mark A. Blinn*		3,500		30.95		07/13/15		27,605	⁽²⁾		2,741,729		8,792	⁽³⁾		1,746,443
		28,087		52.25		12/14/16							14,427	⁽⁴⁾		2,865,779
													14,870	⁽⁵⁾		2,953,777
*Richard J. Guiltinan*		—		—		—		5,124	⁽⁶⁾		508,916		3,413	⁽³⁾		677,958
													2,887	⁽⁴⁾		573,474
													1,941	⁽⁵⁾		385,560
*Thomas E. Ferguson*		—		—		—		26,206	⁽⁷⁾		2,602,780		8,000	⁽³⁾		1,589,120
													4,900	⁽⁴⁾		973,336
													4,967	⁽⁵⁾		986,645
*Thomas L. Pajonas*		—		—		—		17,016	⁽⁸⁾		1,690,029		8,000	⁽³⁾		1,589,120
													4,046	⁽⁴⁾		803,697
													3,836	⁽⁵⁾		761,983
*Ronald F. Shuff*		—		—		—		8,130	⁽⁹⁾		807,472		7,000	⁽³⁾		1,390,480
													3,538	⁽⁴⁾		702,788
													3,157	⁽⁵⁾		627,106

(1)

Calculated using a price per share of $99.32, the closing market price of the Company’s common stock as reported by the NYSE on December 30, 2011, the end of the Company’s last completed fiscal year. The contingent performance share unit amounts include regularly declared dividends accrued on the “target” award, which will vest only to the same extent as the underlying award, if at all. Concerning all contingent performance awards, the amounts of units used in calculating the payout values assumes the highest level of performance target achievement, which would result in the target unit amounts presented in the table vesting at 200%.

(2)

3,355 shares vested on February 12, 2012; 4,730 shares vested on February 19, 2012; and 4,930 shares vested on February 11, 2012. Mr. Blinn’s remaining shares of restricted common stock vest as follows: 4,730 shares on February 19, 2013; 4,930 shares on February 11, 2013; and 4,930 shares on February 11, 2014.

(3)

These shares represent target long-term equity incentive awards in the form of contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The target set for this plan is based on the Company’s average RONA over the three-year period ending December 31, 2011 as a percentage of the average RONA of the Company’s HPPG for the same period. Payouts can range from 0 shares to a maximum of 200% of the shares granted. In the event of death, disability or retirement, the award payout will occur at the vesting date if the participant’s termination occurs during the last year of the award’s performance cycle. As of December 31, 2011, the Company estimated vesting of, and therefore expensed, these awards at 200% of the target shares presented based on expected achievement of performance targets.

(4)

These shares represent target long-term equity incentive awards in the form of contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The target set for this plan is based on the Company’s average RONA over the three-year period ending December 31, 2012 as a percentage of the average RONA of the Company’s HPPG for the same period. Payouts can range from 0 shares to a maximum of 200% of the target. In the event of death, disability or retirement, the award payout will occur at the vesting date if the participant’s termination occurs during the last year of the award’s performance cycle. As of December 31, 2011, the Company estimated vesting of, and therefore expensed, these awards at 200% of the target shares presented based on expected achievement of performance targets.

(5)

These shares represent target long-term equity incentive awards in the form of contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The target set for this plan is based on the Company’s average RONA over the three-year period ending December 31, 2013 as compared to the RONA averages of the Company’s HPPG members for the same period. Payouts can range from 0 shares to a maximum of 200% of the target. In the event of death, disability or retirement, the award payout will occur at the vesting date if the participant’s termination occurs during the last year of the award’s performance cycle. As of December 31, 2011, the Company estimated vesting of, and therefore expensed, these awards at 124.2% of the target shares presented based on expected achievement of performance targets.

(6)	1,303 shares vested on February 12, 2012; 946 shares vested on February 18, 2012; and 643 shares vested on February 10, 2012. Mr. Guiltinan’s remaining shares of restricted common stock will be forfeited due to his retirement from the Company in 2012.

(7)	8,053 shares vested on February 12, 2012; 1,606 shares vested on February 18, 2012; and 1,647 shares vested on February 10, 2012. Mr. Ferguson’s remaining shares of restricted common stock will be forfeited due to his retirement from the Company in 2012.

(8)

3,053 shares vested on February 12, 2012; 1,326 shares vested on February 18, 2012; and 1,270 shares vested on February 10, 2012. Mr. Pajonas’ remaining shares of restricted common stock vest as follows: 8,827 shares on February 18, 2013; 1,270 shares on February 10, 2013; and 1,270 shares on February 10, 2014.

(9)

2,670 shares vested on February 12, 2012; 1,160 shares vested on February 18, 2012; and 1,047 shares vested on February 10, 2012. Mr. Shuff’s remaining shares of restricted common stock vest as follows: 1,160 shares on February 18, 2013; 1,046 shares on February 10, 2013; and 1,047 shares on February 10, 2014.

2011 Option Exercises and Stock Vested

The following table sets forth certain information with respect to stock option exercises and restricted common stock vesting during the fiscal year ended December 31, 2011 with respect to the Named Executive Officers.


	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)⁽¹⁾		Value Realized on Vesting ($)
*Mark A. Blinn*		—		—		20,999		2,680,004
*Richard J. Guiltinan*		—		—		6,277		800,810
*Thomas E. Ferguson*		—		—		13,398		1,709,068
*Thomas L. Pajonas*		—		—		13,749		1,751,759
*Ronald F. Shuff*		—		—		12,058		1,536,241

(1)	The number of shares reported includes shares that were forfeited during the fiscal year ended December 31, 2011 to pay for taxes upon the vesting of restricted common stock.

2011 Pension Benefits

The following table sets forth certain information as of December 31, 2011 with respect to potential payments under our pension plans for each Named Executive Officer. Please refer to “—Elements of the Executive Compensation Program—Flowserve Corporation Pension Plans” above for a narrative description of the material factors necessary to an understanding of our pension plans.


Name	Plan Name	Number of Years Credited Service (#)			Present Value of Accumulated Benefit ($)		Payments During Last Fiscal Year ($)
*Mark A. Blinn*	Qualified—Cash Balance⁽¹⁾		7.1			118,857		—
	Non-Qualified—SMRP		7.1			602,796		—
	Non-Qualified—SERP		7.1			459,093		—
*Richard J. Guiltinan*	Qualified—Cash Balance⁽¹⁾		7.5			148,588		—
	Non-Qualified—SMRP		7.5			245,924		—
	Non-Qualified—SERP		4.6	⁽²⁾		152,144		—
*Thomas E. Ferguson*	Qualified—Cash Balance⁽¹⁾		24.1			490,407		—
	Non-Qualified—SMRP		24.1			674,858		—
	Non-Qualified—SERP		24.1	⁽³⁾		928,224		—
*Thomas L. Pajonas*	Qualified—Cash Balance⁽¹⁾		7.7			151,923		—
	Non-Qualified—SMRP		7.7			439,018		—
	Non-Qualified—SERP		7.7			345,670		—
*Ronald F. Shuff*	Qualified—Cash Balance⁽¹⁾		23.5			549,601		—
	Non-Qualified—SMRP		23.5			675,236		—
	Non-Qualified—SERP		23.5	⁽⁴⁾		789,000		—

(1)

The Company sponsors cash balance designed pension plans for eligible employees. Each executive accumulates a notional amount derived from the plan provisions; each Named Executive Officer’s account balances as of December 31, 2011 are presented above. We believe that this is the best estimate of the present value of accumulated benefits.

(2)	Mr. Guiltinan became eligible to participate in the SERP as of May 16, 2007.

(3)

Mr. Ferguson became an executive officer and eligible to participate in the SERP as of July 18, 2002. At the time he became eligible to participate in the SERP, he was provided with a special plan enhancement, per SERP provisions, crediting him with additional SERP benefits based on his years of service to the Company prior to becoming an executive officer.

(4)	Mr. Shuff became eligible to participate in the SERP as of July 1, 1999. Effective in August 2007, he was provided with a special plan enhancement, per Board approval, crediting him with enhanced SERP benefits based on his company service prior to July 1, 1999.

2011 Non-Qualified Deferred Compensation

The following table sets forth certain information concerning the non-qualified deferred compensation plans during the fiscal year (“FY”) ended December 31, 2011 with respect to the Named Executive Officers. Please refer to “—Elements of the Executive Compensation Program—Non-Qualified Deferred Compensation Plan” above for a narrative description of the material factors necessary to an understanding of the non-qualified deferred compensation plan.


Name	Executive Contributions in Last FY ($)		Registrant Contributions in Last FY ($)		Aggregate Earnings in Last FY⁽¹⁾ ($)			Aggregate Withdrawals/ Distribution ($)		Aggregate Balance at Last FYE⁽²⁾ ($)
*Mark A. Blinn*		—		—		—			—		—
*Richard J. Guiltinan*		—		—		—			—		—
*Thomas E. Ferguson*		—		—		(85,172	)		—		971,034
*Thomas L. Pajonas*		—		—		—			—		—
*Ronald F. Shuff*		—		—		(561,794	)		—		3,111,496

(1)

Aggregate earnings represent the change in investment value of the non-qualified plans’ balances, plus interest earned and dividends paid or accrued on the plans’ balances, during the 2011 fiscal year. There were no above-market or preferential earnings with respect to the deferred compensation, and therefore none of the earnings with the respect to the deferred compensation were reported in the “Summary Compensation Table.”

(2)	Aggregate balance represents deferred amounts from prior years and any accrued interest or dividends thereon.

Potential Payments upon Termination or Change-in-Control

The information below describes certain compensation that would have been paid under existing plans and contractual arrangements to the Named Executive Officers in the event of a termination of such executive’s employment with the Company or change-in-control of the Company, assuming such events occurred on December 31, 2011. Amounts shown thus include amounts earned through such time and are estimates of the amounts that would have been paid out to the executives upon their termination or a change-in-control (based upon the executive’s compensation and service levels as of such date and the closing price of the Company’s common stock on December 30, 2011 of $99.32). The actual amounts to be paid out can only be determined at the time of a change-in-control or such executive’s termination of employment with the Company. Upon any termination of employment, each of the Named Executive Officers would also be entitled to the vested amounts and contributions shown in the “2011 Pension Benefits” and “2011 Non-Qualified Deferred Compensation” tables above.

The Company also sponsors the Officer Severance Plan covering the Named Executive Officers and the CIC Plan covering the Named Executive Officers. In addition, the Company sponsors several non-qualified pension plans and equity and non-equity incentive compensation plans that provide the Named Executive Officers with additional compensation in connection with a change-in-control or termination of employment under certain circumstances. The following is a description of the compensation payable to the Named Executive Officers in connection with a termination of employment and/or change-in-control under these arrangements and a table summarizing the estimated payouts assuming that a termination of employment and/or change-in-control occurred on December 31, 2011.

Flowserve Corporation Officer Severance Plan

All of the Named Executive Officers participated in the Company’s Officer Severance Plan as of December 31, 2011, as described under “—Elements of the Executive Compensation Program” above. Under the Officer Severance Plan, the Company’s officers are provided the following benefits for a termination of employment as a result of a reduction in force or if the executive is terminated without cause: (i) two years of the officer’s current base salary, paid on a bi-weekly basis in accordance with the Company’s regular salary payments and (ii) a lump sum payment, payable at the time annual incentive awards are paid to officers still employed by the Company, substantially equivalent to the annual incentive plan payment, at target, the officer would have otherwise received under the Company’s annual incentive plan if the officer had been employed at the end of the applicable performance period and was otherwise eligible for a payment under the annual incentive plan. To the extent an affected officer has outstanding contingent performance shares or time-vested restricted common stock, the

officer would also be eligible to receive (i) contingent performance shares, if any, that would otherwise vest within 180 calendar days following the termination date, and (ii) a cash payment in lieu of any time vested restricted common stock that would otherwise vest within 90 calendar days following the termination date.

In addition, in order to receive such payments, the executive must execute a release and covenant not to sue and must continue to comply with a one year non-competition and non-solicitation agreement following his termination of employment. No benefits are payable under the Officer Severance Plan to any officer who receives benefits under the CIC Plan. The Officer Severance Plan does not provide for any additional payments or benefits upon a termination of employment by the Company for cause, upon the executive’s resignation for any reason (including “good reason” or “constructive termination”) or upon the executive’s death or disability.

For purposes of the Officer Severance Plan, the term “cause” means the covered executive’s (i) willful and continued failure to perform basic job duties after written demand for substantial performance is delivered to the executive by the Board, which specifically identifies the manner in which the Board believes that the executive has not substantially performed the executive’s duties, or (ii) willful engagement in conduct materially and demonstrably injurious to the Company, monetarily or otherwise.

In addition, to protect the Company’s competitive position, each executive is required to sign an agreement with the Company that requires the executive to forfeit the proceeds from some or all of the executive’s long-term incentive awards if the executive engages in conduct that is detrimental to the Company. Detrimental conduct includes working for certain competitors, soliciting customers or employees after employment ends and disclosure of confidential information in a manner that may result in competitive harm to the Company.

Flowserve Corporation Executive Officer Change-in-Control Severance Plan

All of the Named Executive Officers participated in the Company’s CIC Plan as of December 31, 2011 as described under “—Elements of the Executive Compensation Program” above. Benefits under the CIC Plan are triggered if, within two years following a change-in-control of the Company (as defined in the CIC Plan and discussed below), the employment of the Named Executive Officer is terminated involuntarily other than for cause, death or disability, or for reasons constituting a “constructive termination.” In addition, benefits are triggered when a Named Executive Officer is terminated within the 90-day period immediately prior to a change-in-control if such termination (i) occurs after the initiation of discussions leading to such change-in-control and (ii) can be demonstrated to have occurred at the request or initiation of parties to such change-in-control.

Upon the occurrence of the change-in-control and without a requirement that the Named Executive Officer’s employment be terminated, all then-outstanding unvested equity awards (including stock options, restricted common stock and contingent performance share awards) will fully vest.

The severance benefits provided upon a termination of employment covered under the CIC Plan include:

•

A target bonus or target annual incentive award in effect at the time of termination (or if higher, at the time of the change-in-control), pro-rated based on the number of days the Named Executive Officer was employed during the performance period.

•

A lump sum cash payment equal to three times the sum of the executive’s then-current annual base salary and target bonus or other annual incentive award. For purposes of this calculation, the base salary is the highest of: (i) the highest-annualized monthly base salary during the twelve months preceding the termination; (ii) the base salary in effect on the date of termination; and (iii) the base salary in effect on the date of the change-in-control. For purposes of this calculation, the target bonus or annual incentive award is the higher of the target bonus or annual incentive award in effect on (i) the date of termination or (ii) the date of the change-in-control.

•

Payment of awards granted under the long-term incentive program and any other stock option or other stock-based long-term incentive award that have been earned and not yet paid, pursuant to the terms of the applicable plan.

•

Full vesting at target of each stock option or other stock-based long-term incentive award. Named Executive Officers have 90 days following the date of employment termination to exercise vested stock options.

•

Continuation of participation in the life insurance, medical, health and accident benefit plans for a period of up to three years following the date of termination.

•

Calculation of benefits under the Company’s defined benefit pension plan including supplemental retirement plan benefits with three years added to the executive’s years of service and age for retirement purposes.

•

A tax “gross-up” payment sufficient to compensate the executive for the amount of any excise tax imposed by Section 4999 of the Code and for any taxes imposed on such additional payment. This potential payment is only available to individuals who were serving as executive officers prior to January 1, 2011; payments are not available to any individuals who became or may become an executive officer and eligible to participate in the CIC Plan after this date.

The potential tax gross-up payment under the CIC Plan, while it may be substantial and may result in the Company’s loss of a tax deduction of compensation expense, is only applicable in the event of a change-in-control. The potential tax gross-up payment will change from time to time based on several factors, including the executive’s W-2 earnings, unvested equity value and the Company’s stock price.

For purposes of the CIC Plan, “change-in-control” generally means the occurrence of any of the following events:

•

any person acquires more than 30% of the Company’s total voting power represented by the Company’s then outstanding voting securities;

•

a majority of the members of Board are replaced in any 12-month period other than in specific circumstances;

•

the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation in which either (i) the holders of the Company’s outstanding shares of common stock and outstanding voting securities immediately prior to such merger or consolidation receive securities possessing at least 50% of the total voting power represented by the outstanding voting securities of the surviving entity (or parent thereof) immediately after such merger or consolidation, or (ii) the officers of the Company immediately prior to such merger or consolidation constitute at least three-quarters of the officers of the surviving entity (or parent thereof) immediately after such merger or consolidation, the elected members of the Board immediately prior to such merger or consolidation constitute at least three-quarters of the board of directors of the surviving entity (or parent thereof) immediately after such merger or consolidation and the positions of Chairman of the Board, CEO and President of the corporation resulting from merger or consolidation are held by individuals with the same positions at the Company as of immediately prior to such merger or consolidation; or

•

any person acquires more than 50% of the total gross fair market value of the assets of the Company.

For purposes of the CIC Plan, the term “cause” means: (i) the willful and continued failure by a covered executive to substantially perform his duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the covered executive by the Board that specifically identifies the manner in which the Board believes that he has not substantially performed his duties, or (ii) the willful engaging by the covered executive in conduct materially and demonstrably injurious to the Company, monetarily or otherwise.

For purposes of the CIC Plan, the term “constructive termination” generally means the occurrence of any one of the following events without the express written consent of the covered executive:

•

the Company’s assignment to the covered executive of any duties inconsistent with his position, duties, responsibilities and status with the Company immediately prior to a change-in-control, or a change in the covered executive’s reporting responsibilities, titles or offices as in effect immediately prior to a change-in-control, or any removal of the covered executive from or any failure to re-elect the covered executive to any of such positions;

•

a material reduction by the Company of the covered executive’s base salary;

•

the relocation (without the covered executive’s consent) of the covered executive’s principal place of employment by more than 35 miles from its location immediately prior to a change-in-control;

•

any other material failure of the Company to honor all the terms and provisions of the CIC Plan.

A “constructive termination” shall only occur if the covered executive provides notice to the Company of the occurrence of an event that constitutes “constructive termination” within 30 days of the initial occurrence of such event, the Company fails to cure such event within the first 30 days following the receipt of such notice, and the covered executive terminates his employment in the first 30 days following the end of the Company’s opportunity to cure.

The receipt of benefits following termination under the CIC Plan is contingent upon the covered executive executing a confidentiality and non-competition agreement and release in favor of the Company.

The Company’s supplemental pension and incentive plans for senior management contain provisions that serve to implement the provisions of the CIC Plan. Our Qualified Plan also confers competitive post-employment benefits to the executives upon a change-in-control. The additional years of credited service and additional age credit for purposes of determining an individual’s benefits under the plan compensate that individual upon his early termination from the plan.

Quantification of Potential Payments

The following tables set forth the estimated value of the potential payments to each of the Named Executive Officers, assuming the executive’s employment had terminated on December 31, 2011. For the events of termination involving a change-in-control, we assumed that the change-in-control also occurred on that date. In addition to the payments set forth in the following tables, the Named Executive Officers may receive certain payments upon their termination or a change-in-control pursuant to our Deferral Plan, Qualified Plan, SERP and SMRP. Previously vested amounts and contributions made to such plans by each Named Executive Officer are disclosed in the “2011 Non-Qualified Deferred Compensation” and “2011 Pension Benefits” tables.

Mark A. Blinn


Triggering Event	Compensation Component	Payout($)
Death	Life insurance benefit (1.5x base salary; third party payment)		1,417,500

	Total		1,417,500
Disability	Short-term and long-term disability benefit to age 65 (third party payment)		3,892,371

	Total		3,892,371
Termination Without Cause	Termination payment (2x base salary)		1,890,000
by the Company or For Good	Target annual incentive award		945,000

Reason by the Employee	Total		2,835,000
Change-in-Control—	Immediate vesting of restricted stock⁽¹⁾		7,366,493

Employment Continues	Total		7,366,493
Change-in-Control—	Termination payment (3x base salary)		2,835,000
Termination Without Cause	Termination payment (3x target annual incentive award)		2,835,000
by the Company or	Prorated target annual incentive award		945,000
Constructive Termination	Immediate vesting of restricted stock⁽¹⁾		7,366,493
	Supplemental pension benefit		1,038,750
	Health & welfare benefit		62,384

	Total⁽²⁾		15,082,627

(1)	These amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 30, 2011 ($99.32).

(2)	For 2011, Mr. Blinn’s total payments were within the “safe harbor” amount prescribed under Section 280G of the Code and, as such, no excise tax and gross-up payment would be necessary.

Richard J. Guiltinan—Former Potential Payments⁽¹⁾


Triggering Event	Compensation Component	Payout($)
Death	Life insurance benefit (1.5x base salary; third party payment)		573,039

	Total		573,039
Disability	Short-term and long-term disability benefit to age 65 (third party payment)		1,853,417

	Total		1,853,417
Termination Without Cause	Termination payment (2x base salary)		764,052
by the Company or For Good	Target annual incentive award		191,013

Reason by the Employee	Total		955,065
Change-in-Control—	Immediate vesting of restricted stock⁽²⁾		1,660,338

Employment Continues	Total		1,660,338
Change-in-Control—	Termination payment (3x base salary)		1,146,078
Termination Without Cause	Termination payment (3x target annual incentive award)		573,039
by the Company or	Prorated target annual incentive award		191,013
Constructive Termination	Immediate vesting of restricted stock⁽²⁾		1,660,338
	Supplemental pension benefit		325,187
	Health & welfare benefit		50,397

	Total⁽³⁾		3,946,052

(1)	Mr. Guiltinan retired from his roles on March 31, 2012.

(2)	These amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 30, 2011 ($99.32).

(3)	For 2011, Mr. Guiltinan’s total payments were within the “safe harbor” amount prescribed under Section 280G of the Code and, as such, no excise tax and gross-up payment would be necessary.

Thomas E. Ferguson—Former Potential Payments⁽¹⁾


Triggering Event	Compensation Component	Payout($)
Death	Life insurance benefit (1.5x base salary; third party payment)		772,500

	Total		772,500
Disability	Short-term and long-term disability benefit to age 65 (third party payment)		2,455,116

	Total		2,455,116
Termination Without Cause	Termination payment (2x base salary)		1,030,000
by the Company or For Good	Target annual incentive award		360,500

Reason by the Employee	Total		1,390,500
Change-in-Control—	Immediate vesting of restricted stock⁽²⁾		5,161,331

Employment Continues	Total		5,161,331
Change-in-Control—	Termination payment (3x base salary)		1,545,000
Termination Without Cause	Termination payment (3x target annual incentive award)		1,081,500
by the Company or	Prorated target annual incentive award		360,500
Constructive Termination	Immediate vesting of restricted stock⁽²⁾		5,161,331
	Supplemental pension benefit		924,253
	Health & welfare benefit		43,448

	Total⁽³⁾		9,116,031

(1)	Mr. Ferguson transitioned from his role on January 9, 2012.

(2)	These amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 30, 2011 ($99.32).

(3)	For 2011, Mr. Ferguson’s total payments were within the “safe harbor” amount prescribed under Section 280G of the Code and, as such, no excise tax and gross-up payment would be necessary.

Thomas L. Pajonas


Triggering Event	Compensation Component	Payout($)
Death	Life insurance benefit (1.5x base salary; third party payment)		733,338

	Total		733,338
Disability	Short-term and long-term disability benefit to age 65 (third party payment)		2,256,729

	Total		2,259,729
Termination Without Cause	Termination payment (2x base salary)		977,784
by the Company or For Good	Target annual incentive award		317,780

Reason by the Employee	Total		1,295,564
Change-in-Control—	Immediate vesting of restricted stock⁽¹⁾		4,052,919

Employment Continues	Total		4,052,919
Change-in-Control—	Termination payment (3x base salary)		1,466,676
Termination Without Cause	Termination payment (3x target annual incentive award)		953,338
by the Company or	Prorated target annual incentive award		317,780
Constructive Termination	Immediate vesting of restricted stock⁽¹⁾		4,052,919
	Supplemental pension benefit		484,534
	Health & welfare benefit		47,676

	Total⁽²⁾		7,322,923

(1)	These amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 30, 2011 ($99.32).

(2)	For 2011, Mr. Pajonas’ total payments were within the “safe harbor” amount prescribed under Section 280G of the Code and, as such, no excise tax and gross-up payment would be necessary.

Ronald F. Shuff


Triggering Event	Compensation Component	Payout($)
Death	Life insurance benefit (1.5x base salary; third party payment)		638,918

	Total		638,918
Disability	Short-term and long-term disability benefit to age 65 (third party payment)		1,399,406

	Total		1,399,406
Termination Without Cause	Termination payment (2x base salary)		851,890
by the Company or For Good	Target annual incentive award		234,270

Reason by the Employee	Total		1,086,160
Change-in-Control—	Immediate vesting of restricted stock⁽¹⁾		2,855,512

Employment Continues	Total		2,855,512
Change-in-Control—	Termination payment (3x base salary)		1,277,835
Termination Without Cause	Termination payment (3x target annual incentive award)		702,809
by the Company or	Prorated target annual incentive award		234,270
Constructive Termination	Immediate vesting of restricted stock⁽¹⁾		2,855,512
	Supplemental pension benefit		782,991
	Health & welfare benefit		54,528

	Total⁽²⁾		5,907,945

(1)	These amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 30, 2011 ($99.32).

(2)	For 2011, Mr. Shuff’s total payments were within the “safe harbor” amount prescribed under Section 280G of the Code and, as such, no excise tax and gross-up payment would be necessary.

Proposal Two: Advisory Vote on Executive Compensation

The Board is providing shareholders the opportunity to cast an advisory vote on the compensation of our Named Executive Officers. This proposal, commonly known as a “Say on Pay” proposal, gives our shareholders the opportunity to endorse or not endorse our executive compensation programs and policies and the compensation paid to our Named Executive Officers.

The Board values the opinions of the Company’s shareholders as expressed through their votes and other communications. This Say on Pay vote is advisory, meaning that it is not binding on the O&C Committee or Board. This vote will not affect any compensation already paid or awarded to any Named Executive Officer, nor will it overrule any decisions the Board has made. Nonetheless, the O&C Committee and the Board will review and carefully consider the outcome of the advisory vote on executive compensation when making future decisions regarding our executive compensation programs and policies.

We design our executive compensation programs to implement our core objectives of attracting and retaining key leaders, rewarding current performance, driving future performance and aligning the long-term interests of our executives with those of our shareholders. Shareholders are encouraged to read the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement, including the “Executive Summary”. In the CD&A, we have provided shareholders with a description of our compensation programs, including the philosophy and strategy underpinning the programs, the individual elements of the compensation programs and how our compensation plans are administered.

We believe shareholders should consider the following financial performance data and compensation design elements when voting on this proposal:

Financial Performance Data

•

Concerning our 2011 performance: bookings were $4.66 billion, up 10.2% over 2010; sales were $4.51 billion, up 11.9% over 2010; and operating income was $618.7 million, up 6.4% over 2010.

•

Both the Operating Income and Cash Flows from Operations performance metrics for our annual incentive plan were below plan and appropriately resulted in an annual incentive award percentage payout of 61.5% of target, with one executive officer receiving an 8.5% increase in his award amount in recognition of his individual performance in 2011.

•

The Company’s average return on net assets (“RONA”) for the 2009-2011 performance period was 20.8%, which represented approximately 225% of the average RONA of the HPPG.

•

The Company’s total shareholder return for 2009-2011, which is measured by the change in our stock price from December 31, 2008 through December 31, 2011, plus dividends paid during the period, was 100.3%.

Compensation Design Elements

•

On average, the Named Executive Officers had 72.5% of their pay “at risk,” or dependent upon both the Company’s and each individual’s performance.

•

Maximum payout levels for the annual cash incentive opportunity are capped at 200% of target, with a maximum additional 25% adjustment for individual performance, and the contingent performance share award payouts are capped at 200% of target, which avoids excessive total compensation and reduces the incentive to engage in unnecessarily risky behavior.

•

The annual cash incentive opportunity and the contingent performance share awards have threshold payout levels, ensuring that incentive compensation is reduced or eliminated altogether if minimum performance levels are not achieved.

•

Our officers are subject to equity ownership guidelines, which further encourage a long-term focus on sustainable performance and align our officers’ interests with those of our shareholders, and are prohibited from engaging in transactions designed to hedge against the value of the Company’s stock.

•

The Company maintains a Recoupment of Incentive Compensation Policy allowing for the “clawback” of incentive compensation in the event of a financial restatement or misconduct.

•

The Company has eliminated all executive perquisites.

The Board believes that the Company’s executive compensation programs use appropriate structures and sound pay practices that are effective in achieving our core objectives. Accordingly, the Board recommends that you vote in favor of the following resolution:

“RESOLVED, that the Flowserve Corporation shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers as described in the section of this Proxy Statement entitled ‘Executive Compensation’.”

Required Vote and Recommendation

Approval of this proposal will require the affirmative vote of a majority of the votes cast in person or represented by proxy. Abstentions will count as votes cast on this proposal, but will not count as votes “for” the proposal. Therefore, abstentions will have the same effect as votes “against” the proposal. Additionally, broker non-votes will not be considered to have voted on this proposal, and therefore will have no effect on the proposal. The individuals named as proxies on the enclosed proxy card will vote your proxy “FOR” this proposal unless you instruct otherwise on the proxy or you withhold authority to vote.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THIS ADVISORY VOTE ON EXECUTIVE COMPENSATION.

Certain Relationships and Related Transactions

The Company maintains a written policy for approval of transactions between the Company and its directors, director nominees, executive officers, greater-than-5% beneficial owners and their respective immediate family members, where the amount involved in the transaction exceeds or is expected to exceed $120,000 in a single calendar year.

The policy provides that the CG&N Committee reviews transactions subject to the policy and determines whether or not to approve or ratify those transactions. In doing so, the CG&N Committee takes into account, among other factors it deems appropriate, whether the transaction is on terms that are no less favorable to the Company than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. In addition, the Board has delegated authority to the Chairman of the CG&N Committee to pre-approve or ratify transactions where the aggregate amount involved is expected to be less than $1 million. A summary of any new transactions pre-approved by the Chairman is provided to the full CG&N Committee for its review in connection with each regularly scheduled CG&N Committee meeting.

The CG&N Committee has considered and adopted standing pre-approvals under the policy for limited transactions with related persons. Pre-approved transactions include:

•

business transactions with other companies in which a related person’s only relationship is as an employee, director or less-than-10% beneficial owner if the amount of business falls below the thresholds in the NYSE’s listing standards and the Company’s director independence standards; and

•

charitable contributions, grants or endowments to a charitable organization where a related person is an employee if the aggregate amount involved does not exceed the greater of $1 million or 2% of the organization’s total annual receipts.

The CG&N Committee was not requested to and did not approve any transactions required to be reported under applicable SEC rules in 2011.

Security Ownership of Directors and Certain Executive Officers

The following table sets forth as of March 14, 2012 ownership of Company common stock by members of the Board, each Named Executive Officer of the Company listed in the “Summary Compensation Table” individually and all members of the Board and all executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder identified possesses sole voting and investment power with respect to his or her shares.


Name of Beneficial Owner	Amount and nature of beneficial ownership⁽¹⁾		Percent of class
Mark A. Blinn		130,534⁽ ²⁾		*
Gayla J. Delly		5,019⁽ ³⁾		*
Thomas E. Ferguson		58,927⁽ ⁴⁾		*
Roger L. Fix		12,281⁽ ⁵⁾		*
John R. Friedery		7,305⁽ ⁶⁾		*
Richard J. Guiltinan		24,428⁽⁷⁾		*
Joe E. Harlan		4,908⁽ ⁸⁾		*
Michael F. Johnston		35,973⁽ ⁹⁾		*
Rick J. Mills		9,340⁽¹ ⁰⁾		*
Thomas L. Pajonas		61,678⁽¹¹⁾		*
Charles M. Rampacek		34,505⁽¹ ²⁾		*
David E. Roberts		145⁽¹³⁾		*
James O. Rollans		39,941⁽¹ ⁴⁾		*
William C. Rusnack		17,118⁽¹ ⁵⁾		*
Ronald F. Shuff		54,840⁽¹ ⁶⁾		*
All members of the Board and officers as a group (17 individuals)		550,988⁽¹⁷⁾		1.0	%

*	Less than 1%.

(1)

Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act and, unless otherwise indicated, represents securities for which the beneficial owner has sole voting and investment power. Any securities held in the name of and under the voting and investment power of a spouse of an executive officer or director have been excluded. For each person or group, also includes any securities that person or group has the right to acquire within 60 days pursuant to stock options under certain Company stock option and incentive plans.

(2)	Includes 31,587 and 17,056 shares of common stock that Mr. Blinn has the right to acquire within 60 days pursuant to stock options and contingent performance share units, respectively.

(3)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Ms. Delly does not possess any voting or investment power over these deferred shares.

(4)

Includes 15,520 shares of common stock that Mr. Ferguson has the right to acquire within 60 days pursuant to contingent performance share units. Also includes 4,116 compensational shares that have been deferred under the Deferral Plan. Mr. Ferguson does not possess any voting or investment power over these deferred shares.

(5)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Fix does not possess any voting or investment power over these deferred shares.

(6)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Friedery does not possess any voting or investment power over these deferred shares.

(7)	Includes 6,620 shares of common stock that Mr. Guiltinan has the right to acquire within 60 days pursuant to contingent performance share units.

(8)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Harlan does not possess any voting or investment power over these deferred shares.

(9)	Includes 34,213 compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Johnston does not possess any voting or investment power over these deferred shares.

(10)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Mills does not possess any voting or investment power over these deferred shares.

(11)	Includes 15,520 shares of common stock that Mr. Pajonas has the right to acquire within 60 days pursuant to contingent performance share units.

(12)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Rampacek does not possess any voting or investment power over these deferred shares.

(13)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Roberts does not possess any voting or investment power over these deferred shares.

(14)	Represents compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Rollans does not possess any voting or investment power over these deferred shares.

(15)	Includes 15,358 compensational shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Rusnack does not possess any voting or investment power over these deferred shares.

(16)

Includes 13,580 shares of common stock that Mr. Shuff has the right to acquire within 60 days pursuant to contingent performance share units. Also includes 30,123 compensational shares that have been deferred under the Deferral Plan. Mr. Shuff does not possess any voting or investment power over these deferred shares.

(17)

Includes 31,587 and 81,656 shares of common stock that members of this group have the right to acquire within 60 days pursuant to stock options and contingent performance share units, respectively, under certain Company stock incentive plans. Also includes 207,834 compensational shares that have been deferred under various Company plans for which no member of the group possesses voting power.

Security Ownership of Certain Beneficial Owners

The following shareholders reported to the SEC that they beneficially own more than 5% of the Company’s common stock. The information is presented as of December 31, 2011 and is based on stock ownership reports on Schedule 13G filed with the SEC and subsequently provided to us. We know of no other shareholder holding 5% or more of the Company’s common stock.


Name and Address of Beneficial Owner	Amount and nature of beneficial ownership⁽¹⁾		Percent of class
Harris Associates L.P. Two North LaSalle Street, Suite 500 Chicago, IL 60602-3790		3,830,684⁽ ²⁾		6.9%
AllianceBernstein LP 1345 Avenue of the Americas New York, NY 10105		3,065,858⁽ ³⁾		5.5%
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355		2,923,159⁽⁴⁾		5.3%
Manning & Napier Advisors, LLC 290 Woodcliff Drive Fairport, NY 14450		2,844,932⁽⁵⁾		5.1%

(1)	Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act and, unless otherwise indicated, represents securities for which the beneficial owner has sole voting and investment power.

(2)	Based on a Schedule 13G/A filed with the SEC on February 14, 2012. The filing indicates sole voting power for 3,830,684 shares, shared voting power for 0 shares, sole dispositive power for 3,830,684 shares and shared dispositive power for 0 shares.

(3)	Based on a Schedule 13G/A filed with the SEC on February 13, 2012. The filing indicates sole voting power for 2,700,417 shares, shared voting power for 5,229 shares, sole dispositive power for 3,058,684 shares and shared dispositive power for 7,174 shares.

(4)	Based on a Schedule 13G/A filed with the SEC on February 10, 2012. The filing indicates sole voting power for 77,946 shares, shared voting power for 0 shares, sole dispositive power for 2,845,213 shares and shared dispositive power for 77,946 shares.

(5)	Based on a Schedule 13G filed with the SEC on January 27, 2012. The filing indicates sole voting power for 2,337,472 shares, shared voting power for 0 shares, sole dispositive power for 2,844,932 shares and shared dispositive power for 0 shares.

Equity Compensation Plan Information

The following table provides certain information about our common stock that may be issued upon the exercise of options granted under the Flowserve Equity and Incentive Compensation Plan (the “2010 Plan”), the Flowserve Corporation 2004 Stock Compensation Plan (the “2004 Plan”), the Flowserve Corporation 1999 Stock Option Plan (the “1999 Plan”) and the Flowserve Corporation 1997 Stock Option Plan (the “1997 Plan”), as of December 31, 2011. The 1999 Plan and the 1997 Plan have expired. No options were granted under any plan in 2011.


Plan Category	Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights⁽¹⁾		Weighted-Average Exercise Price of Outstanding Option, Warrants and Rights⁽²⁾		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)⁽³⁾
Equity compensation plans approved by securities holders		48,446	$	41.71		2,915,181
Equity compensation plans not approved by securities holders		—		—		—
Total		48,446	$	41.71		2,915,181

(1)	All shares of common stock included in this column underlie stock options awarded under the 1997 Plan, the 1999 Plan and the 2004 Plan.

(2)	These amounts represent the weighted average exercise price for the total number of outstanding options.

(3)

The shares of common stock reflected in this column include 2,432,049 shares available for issuance under the 2010 Plan. The shares of common stock reflected in this column also include 483,132 shares that were available for issuance under the 2004 Plan at December 31, 2011. This column does not reflect shares that were the subject of outstanding awards under the 2010 Plan or the 2004 Plan at December 31, 2011.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and any person beneficially owning more than 10% of the Company’s common stock to file reports of ownership and any changes in ownership with the SEC. Based solely on the Company’s review of reports furnished to the Company and representations provided to the Company by persons required to file reports under Section 16 of the Exchange Act, the Company’s directors, executive officers and greater than ten-percent beneficial owners properly and timely complied with their Section 16(a) filing requirements during the fiscal year ended December 31, 2011.

Proposal Three: Elimination of the Classified Structure of the Board of Directors

Article III, Section 2 of the Company’s By-Laws currently provides that the Board shall be classified with respect to the directors’ terms of office by dividing them into three classes, with each class of directors standing for election at every third annual meeting of shareholders. As such, at any given annual meeting of shareholders, the Company’s shareholders have the ability to elect only one class of directors, constituting approximately one-third of the entire Board.

Our Board is strongly committed to good governance practices and is highly interested in the views and concerns of our shareholders. In keeping with this commitment, the Board has regularly reviewed the advantages and disadvantages of maintaining a classified board structure. In the past, the Board has considered the question of annual elections for all directors and concluded that maintaining a classified board was in the best interests of the Company and its shareholders. However, the Board recognizes that electing directors is viewed as an important means by which shareholders exert influence over the management of their company and hold their directors accountable for the management of the company. In this regard, the Board acknowledges the growing sentiment among the investment community in favor of annual elections.

The Board has carefully considered the various rationales for and against maintaining a classified board structure and has concluded that amending and restating the Company’s Restated Certificate of Incorporation (the “Charter”) to provide for the

annual election of all directors is in the best interests of the Company and its shareholders. The Board therefore recommends that shareholders vote to approve the amendment of the Charter by adding a new Article Ninth as set forth in Annex A.

If the proposed amendment of the Company’s Charter is approved by the requisite vote of the Company’s shareholders, it will take effect following the Annual Meeting upon the filing of an amended Charter. As such, the annual election of Board members with terms expiring at the 2013 annual meeting (as well as any new director appointed to the Board as a result of an increase in the size of the Board or to fill a vacancy on the Board), would commence with such 2013 annual meeting of shareholders, and the current terms of previously-elected directors (including those directors elected at this Annual Meeting) would not be affected. Declassification of the Board would therefore “phase-in” as presented in the following illustration:

LOGO

As shown in the above illustration, if the proposed Charter amendment is approved, the entire board of directors will stand for election for terms expiring at the next succeeding annual meeting of shareholders beginning with the 2015 annual meeting of shareholders.

If the proposed Charter amendment is approved by the requisite vote of the Company’s shareholders, the Board intends to also amend Article III, Section 2 of the Company’s By-Laws to eliminate the current references to a classified board and substantially conform the provision to the Charter amendment.

Required Vote and Recommendation

Pursuant to Article Eighth of our Restated Certificate of Incorporation, approval of this proposal will require the affirmative vote of a majority of all outstanding shares of common stock entitled to vote on this proposal. Abstentions will not count as votes cast on this proposal. Therefore, abstentions will have the same effect as a vote “against” the proposal. Additionally, broker non-votes will not be considered to have voted on this proposal and will therefore have the same effect as a vote “against” the proposal. The individuals named as proxies on the enclosed proxy card will vote your proxy “FOR” this proposal unless you instruct otherwise on the proxy or unless you withhold authority to vote.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE CHARTER OF THE COMPANY TO ELIMINATE THE CLASSIFIED STRUCTURE OF THE BOARD.

Proposal Four: Shareholder Right to Call a Special Meeting of Shareholders

Currently, pursuant to Article II, Section 2 of the Company’s By-Laws, only the Board, the CG&N Committee, the Chairman of the Board, the President or the Chief Executive Officer may call a special meeting of the Company’s shareholders. The Board is proposing, for approval by the Company’s shareholders, an amendment to the Company’s Charter to add a right permitting shareholders of record who have held at least a twenty-five percent (25%) net long position in the Company’s outstanding common stock for at least one year to call a special meeting of shareholders.

Our Board is strongly committed to good governance practices and is highly interested in the views and concerns of our shareholders. In keeping with this commitment, the Board has regularly reviewed the advantages and disadvantages of providing shareholders the right to call a special meeting of shareholders. The Board believes the right to call special meetings of shareholders should be exercised judiciously and only in consideration of extraordinary, time-sensitive events that are of interest to a broad base of shareholders. For every meeting of shareholders, whether special or regular, the Company

is required to provide each shareholder a notice of meeting and proxy materials, which results in significant legal, printing, mailing and other expenses. Additionally, the attention of the Company’s directors, officers and employees is diverted from performing their primary function, which is to operate the Company’s business to deliver shareholder value. However, the Board also recognizes that providing shareholders the right to call a special meeting is viewed as an important enhancement of shareholder rights to promote director accountability.

The Board has carefully considered the various rationales for and against providing shareholders the right to call a special meeting of shareholders. Based upon this analysis, the Board has concluded that amending the Company’s Charter as set forth in Annex B to provide shareholders of record who have held at least a twenty-five percent (25%) net long position in the Company’s outstanding common stock for at least one year the right to call a special meeting of shareholders is in the best interests of the Company and its shareholders.

The Board believes that establishing an ownership threshold of 25% in order to request a special meeting strikes a reasonable balance between: (1) enhancing shareholder rights by providing a meaningful ability to request that the Board call a special meeting; and (2) helping protect against the misuse or overuse of the right to call a special meeting of shareholders. Additionally, by reference to Rule 14e-4 under the Exchange Act, the proposed Charter amendment would require that shareholders requesting a special meeting hold the requisite ownership percentage in a net long position for one year. For the purposes of the proposed Charter amendment, a shareholder’s net long position is the amount of the Company’s shares in which the shareholder holds a positive (also known as long) economic interest, reduced by the amount of the Company’s shares in which the shareholder holds a negative (also known as short) economic interest. The one year, net long ownership requirement ensures that, on balance, shareholders seeking to call a special meeting have a long-term and meaningful positive economic interest in the Company.

If the proposed Charter amendment is approved by the requisite vote of the Company’s shareholders, then, consistent with the direction set forth in the Charter amendment, the Board intends to adopt procedures in the Company’s By-Laws for calling and holding special meetings of shareholders. The initial procedures that the Board expects to adopt are set forth in Annex C.

Required Vote and Recommendation

Pursuant to § 803(a) of the New York Business Corporation Law, approval of this proposal will require the affirmative vote of a majority of all outstanding shares of common stock entitled to vote on this proposal. Abstentions will not count as votes cast on this proposal. Therefore, abstentions will have the same effect as a vote “against” the proposal. Additionally, broker non-votes will not be considered to have voted on this proposal and will therefore have the same effect as a vote “against” the proposal. The individuals named as proxies on the enclosed proxy card will vote your proxy “FOR” this proposal unless you instruct otherwise on the proxy or unless you withhold authority to vote.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE CHARTER TO PROVIDE SHAREHOLDERS THE RIGHT TO CALL A SPECIAL MEETING OF SHAREHOLDERS.

Proposal Five: Ratification of Appointment of PricewaterhouseCoopers LLP to Serve as Our Independent Registered Public Accounting Firm For 2012

The Audit Committee has approved PricewaterhouseCoopers LLP (“PwC”) to serve as our independent registered public accounting firm for 2012.

We are asking our shareholders to ratify the appointment of PwC as our independent registered public accounting firm. Although shareholder ratification is not required by our By-laws or otherwise, the Board is submitting this proposal for ratification because we value our shareholders’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice. In the event that our shareholders fail to ratify the selection, it will be considered as a direction to the Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.

Required Vote and Recommendation

The proposal to ratify the appointment of PwC to serve as the Company’s independent registered public accounting firm for 2012 requires the affirmative vote of at least a majority of the votes cast in favor of or against this proposal. Abstentions will count as votes cast on this proposal, but will not count as votes “for” the proposal. Therefore, abstentions will have the same effect as votes “against” the proposal. Additionally, broker non-votes will not be considered to have voted on this proposal, and therefore will have no effect on the proposal. The individuals named as proxies on the enclosed proxy card will vote your proxy “FOR” ratifying the appointment of PwC unless you instruct otherwise on the proxy or unless you withhold authority to vote.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2012.

Report of the Audit Committee

The Audit Committee of the Board of Directors of the Company is comprised of five independent directors, Rick J. Mills (Chairman), Gayla J. Delly, John R. Friedery, Charles M. Rampacek and James O. Rollans. The Audit Committee operates under a written charter adopted by the Board. The Audit Committee met nine times in 2011.

Management has primary responsibility for the Company’s internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report on this audit. The Audit Committee’s responsibility is to monitor and oversee this process, including the engagement of the independent auditors, the pre-approval of their annual audit plan and the review of their annual audit report.

In this context, the Audit Committee has met and held detailed discussions with management on the Company’s consolidated financial statements. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States and that these statements fairly present the financial condition and results of operations of the Company for the period described. The Audit Committee has relied upon this representation without any independent verification, except for the work of PwC, the Company’s independent registered public accounting firm. The Audit Committee also discussed these statements with PwC, both with and without management present, and has relied upon their reported opinion on these financial statements.

The Audit Committee further discussed with PwC matters required to be discussed by Statement on Auditing Standards No. 114 (“The Auditor’s Communication With Those Charged With Governance”), as amended, as adopted by the Public Company Accounting Oversight Board (“PCAOB”). In addition, the Audit Committee received from PwC the written disclosures and letter required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning its independence, and has discussed with PwC its independence from the Company and its management.

Based on these reviews and discussions, including the Audit Committee’s specific review with management of the Company’s Annual Report and based upon the representations of management and the report of the independent auditors to the Audit Committee, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report filed with the SEC.

Rick J. Mills, Chairman

Gayla J. Delly

John R. Friedery

Charles M. Rampacek

James O. Rollans

Other Audit Information

Relationship with Independent-Registered Public Accounting Firm

The Audit Committee appointed PwC to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011. In this role, PwC audits the financial statements of the Company. Representatives from PwC will be present at the Annual Meeting and will be available to respond to appropriate questions from shareholders. They will have the opportunity to make a statement if they desire to do so.

Audit and Non-Audit Fees and Services

The following table summarizes the aggregate fees (excluding value added taxes) for professional services incurred by the Company for the audits of its 2011 and 2010 financial statements and other fees billed to the Company by PwC in 2011 and 2010. In general, the Company retains PwC for services that are logically related to or natural extensions of the Company’s annual audit.


	2011		2010
Audit Fees	$	9,504,000		$10,541,000
Audit Related Fees		415,000		107,000
Total Audit Related Fees		9,919,000		10,648,000
Tax Compliance		290,000		154,000
Tax Consulting/Advisory		82,000		102,000
Total Tax Fees		372,000		255,000
All Other Fees		33,000		18,000
Total Fees	$	10,324,000	$	10,921,000

The Audit Committee pre-approved all of the audit and non-audit fees described above for the years ended December 31, 2011 and December 31, 2010 in accordance with its approval policy discussed below.

Audit Committee Approval Policy

The Audit Committee approves all proposed services and related fees to be rendered by the Company’s independent registered public accounting firm prior to their engagement. Services to be provided by the Company’s independent registered public accounting firm generally include audit services, audit-related services and certain tax services. All fees for the annual audit or audit-related services to be performed by the Company’s independent registered public accounting firm are itemized for the purposes of approval. The Audit Committee approves the scope and timing of the external audit plan for the Company and focuses on any matters that may affect the scope of the audit or the independence of the Company’s independent registered public accounting firm. In that regard, the Audit Committee receives certain representations from the Company’s independent registered public accounting firm regarding their independence and permissibility under the applicable laws and regulations of any services provided to the Company outside the scope of those otherwise allowed. The Audit Committee also approves the internal audit plan for the Company.

The Audit Committee may delegate its approval authority to the Chairman of the Audit Committee to the extent allowed by law. In the case of any delegation, the Chairman must disclose all approval determinations to the full Audit Committee as soon as possible after such determinations have been made.

Other Matters

The Company knows of no other matters to be submitted to the shareholders at the Annual Meeting. If any other matters properly come before the shareholders at the Annual Meeting, it is the intention of the persons named on the enclosed proxy card to vote the shares represented thereby on such matters in accordance with their best judgment.

Annex A

RELATED TO PROPOSAL THREE: ELIMINATION OF THE CLASSIFIED STRUCTURE OF THE BOARD OF DIRECTORS

PROPOSED AMENDMENT TO

THE RESTATED CERTIFICATE OF INCORPORATION OF FLOWSERVE CORPORATION

The Board proposes that the following new Article NINTH be added to the Company’s Restated Certificate of Incorporation:

NINTH: Beginning at the 2013 annual meeting of shareholders, the directors elected to succeed those directors whose terms expire at that meeting shall be elected to a term of office to expire at the 2014 annual meeting of shareholders. At the 2014 annual meeting of shareholders, the directors elected to succeed those directors whose terms expire at that meeting shall be elected to a term of office to expire at the 2015 annual meeting of shareholders. At the 2015 annual meeting of shareholders, and at each annual meeting of shareholders thereafter, each director shall be elected for a term expiring at the next annual meeting of shareholders and until such director’s successor shall have been elected and qualified, except in the case of the director’s prior death, resignation, retirement, disqualification or removal from office.

A-1

Annex B

RELATED TO PROPOSAL FOUR: SHAREHOLDER RIGHT TO CALL A SPECIAL MEETING OF SHAREHOLDERS

PROPOSED AMENDMENT TO

THE RESTATED CERTIFICATE OF INCORPORATION OF FLOWSERVE CORPORATION

The Board proposes that the following new Article ELEVENTH be added to the Company’s Restated Certificate of Incorporation, and that existing Articles TENTH and ELEVENTH be amended as follows:

ELEVENTH: Subject to the rights of the holders of any series of preferred stock, special meetings of the shareholders of the corporation, for any purpose or purposes, unless otherwise prescribed by statute, may be called only by (i) the Board of Directors, (ii) the Corporate Governance & Nominating Committee of the Board of Directors, (iii) the Chairman of the Board of Directors, the President or the Chief Executive Officer, or (iv) by the Secretary at the written request in proper form of one or more record holders having an aggregate “net long position” (defined below) of at least twenty-five percent (25%) of the outstanding Common Stock of the corporation, and having held such net long position continuously for at least one year prior to the date such request is delivered to the corporation (the “Requisite Percent”).

For purposes of determining the Requisite Percent, “net long position” shall be determined with respect to each requesting holder in accordance with the definition thereof set forth in Rule 14e-4 under the Securities Exchange Act of 1934 (the “Exchange Act”) as in effect on [insert date of filing], provided that:

for purposes of such definition, in determining such holder’s “short position,” the reference in such Rule to (A) “the date the tender offer is first publicly announced or otherwise made known by the bidder to the holders of the security to be acquired” shall be the date of the relevant special meeting request and all dates in the one year period prior thereto, and (B) the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the Common Stock of the corporation on the New York Stock Exchange on such corresponding date (or, if such date is not a trading day, the next succeeding trading day), (C) the “person whose securities are the subject of the offer” shall refer to the corporation, and (D) a “subject security” shall refer to the issued and outstanding Common Stock of the corporation; and

ii.

the net long position of such holder shall be reduced by the number of shares as to which such holder does not, or will not, have the right to vote or direct the vote at such special meeting or as to which such holder has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares.

Whether the requesting holders have complied with the requirements of this Article ELEVENTH shall be determined in good faith by the Board of Directors, which determination shall be conclusive and binding on the corporation and the shareholders. The procedures for calling a special meeting of the shareholders of the corporation shall be established by the Board of Directors in the By-Laws of the corporation.

~~TENTH~~TWELFTH: The corporation hereby designates CT Corporation System, having an office at 111 Eighth Avenue, New York, New York 10011, as its registered agent upon whom process against it may be served.

~~ELEVENTH~~THIRTEENTH: No director of this corporation shall be personally liable to this corporation or its shareholders for damages for any breach of duty as a director; provided, however, that, to the extent required by applicable law, the foregoing clause shall not apply to any director if a judgment or other financial adjudication adverse to him establishes (i) that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law, (ii) that he personally gained in fact a financial profit or other advantage to which he was not legally entitled, or (iii) that his acts violated Section 719 of the New York Business Corporation Law. Any repeal or modification of this Article ~~ELEVENTH~~THIRTEENTH shall not adversely affect any right or protection of a director of the corporation existing hereunder with respect to any act or omission occurring prior to or at the time of such repeal or modification.

B-1

Annex C

RELATED TO PROPOSAL FOUR: SHAREHOLDER RIGHT TO CALL A SPECIAL MEETING OF SHAREHOLDERS

If the proposed Charter amendment is approved by the requisite vote of the Company’s shareholders, the Board intends to adopt procedures in the Company’s By-Laws for calling and holding special meetings of shareholders. The initial procedures that the Board expects to adopt are set forth below:

Section 2. Special Meetings.

(a) Subject to the rights of the holders of any series of preferred stock, special meetings of the shareholders of the Company may be called, for any purpose or purposes, unless otherwise prescribed by statute, may be called only as set forth in Article ELEVENTH of the Certificate of Incorporation.

(b) In order for a shareholder requested special meeting under clause (iv) of Article ELEVENTH of the Certificate of Incorporation (a “Shareholder Requested Special Meeting”) to be called, one or more requests for a special meeting (each, a “Shareholder Special Meeting Request,” and collectively, the “Shareholder Special Meeting Requests”) must be signed by the Requisite Percent (as such term is defined in the Certificate of Incorporation) of record holders (or their duly authorized agents) and must be delivered to the Secretary. The Shareholder Special Meeting Request(s) shall be delivered to the Secretary at the principal executive offices of the Company by registered mail, return receipt requested. Each Shareholder Special Meeting Request shall:

(i)

set forth a statement of the specific purpose(s) of the meeting and the matters proposed to be acted on at it;

(ii)

bear the date of signature of each such shareholder (or duly authorized agent) signing the Shareholder Special Meeting Request;

(iii)

set forth (A) the name and address, as they appear in the Company’s stock ledger, of each shareholder signing such request (or on whose behalf the Shareholder Special Meeting Request is signed), (B) the class, if applicable, and the number of shares of common stock of the Company that are owned of record and beneficially by each such shareholder, and (C) include documentary evidence of such shareholder’s record and beneficial ownership of such stock;

(iv)

set forth all information relating to each such shareholder that must be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case, pursuant to Regulation 14A under the Exchange Act; and

(v)

contain the information required by Article II, Section 8(a)(ii)(C) of these By-Laws.

Any requesting shareholder may revoke its special meeting request at any time by written revocation delivered to the Secretary at the principal executive offices of the corporation, and if, following such revocation, there are unrevoked requests from shareholders holding in the aggregate less than the Requisite Percent, the Board, in its discretion, may cancel the special meeting.

(i)

the Board calls an annual or special meeting of shareholders to be held not later than 60 days after the date on which a valid Shareholder Special Meeting Request has been delivered to the Secretary (the “Delivery Date”); or

C-1

(ii)

the Shareholder Special Meeting Request(s) (A) is received by the Secretary during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting; (B) contains an identical or substantially similar item (a “Similar Item”) to an item that was presented at any meeting of shareholders held within one hundred and 120 days prior to the Delivery Date (and, for purposes of this clause (B) the election of directors shall be deemed a “Similar Item” with respect to all items of business involving the election or removal of directors); (C) relates to an item of business that is not a proper subject for action by the party requesting the special meeting under applicable law; (D) was made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law; or (E) does not comply with the provisions of this Section 2.

(d) Except as provided in the next sentence, any special meeting shall be held at such date and time as may be fixed by the Board in accordance with these By-Laws and the NYBCL. In the case of a Shareholder Requested Special Meeting, such meeting shall be held at such date and time as may be fixed by the Board, on condition that (i) the date of any Shareholder Requested Special Meeting shall be not more than 60 days after the record date for such meeting (the “Special Meeting Record Date”), which shall be fixed in accordance with Article II, Section 6 of these By-Laws; (ii) if the Board fails to designate, within 10 days after the Delivery Date, a date and time for a Shareholder Requested Special Meeting, then such meeting shall be held at 9:00 a.m. local time on the 60th day after the Special Meeting Record Date (or, if that day shall not be a business day, then on the next preceding business day); and (iii) in the event that the Board fails to designate a place for a Shareholder Requested Special Meeting within 10 days after the Delivery Date, then such meeting shall be held at the Company’s principal executive offices. In fixing a date and time for any Shareholder Requested Special Meeting, the Board may consider such factors as it deems relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for meeting and any plan of the Board to call an annual meeting or a special meeting.

(e) Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Company’s notice of meeting. Business transacted at any Shareholder Requested Special Meeting shall be limited to the purpose(s) stated in the Shareholder Special Meeting Request(s), except that nothing herein shall prohibit the Board from submitting matters, whether or not described in the Shareholder Special Meeting Request(s), to the shareholders at any Shareholder Requested Special Meeting. Notwithstanding the provisions of this Section 2, unless otherwise required by law, if the shareholders (or qualified representatives of the shareholders) who submitted Shareholder Special Meeting Requests do not appear at the Shareholder Requested Special Meeting to present the matters to be presented for consideration that were specified in the Shareholder Special Meeting Request, the Company need not present such matters for a vote at such meeting.

C-2

Map and Driving Directions to

The Flowserve Corporation Global Technology and Training Center

LOGO

Instructions from Dallas/Fort Worth International Airport (DFW):

•

Take the north exit from the airport to John Carpenter Freeway (Highway 114) heading east

•

Exit Esters Boulevard and turn left onto Esters Boulevard

•

The Flowserve Corporation Global Technology and Training Center is on the northeast corner of Esters Boulevard and West Royal Lane

Instructions from Downtown Dallas:

•

Take Interstate Highway 35E heading north

•

Take the left fork onto Highway 183 toward IRVING (Highway 114)/DFW AIRPORT

•

Take the right fork onto John W. Carpenter Freeway (Highway 114) toward GRAPEVINE/DFW AIRPORT NORTH ENTRY and continue west in one of the outside lanes until you reach the Esters Boulevard exit

•

Exit Esters Boulevard and turn right onto Esters Boulevard

•

The Flowserve Corporation Global Technology and Training Center is on the northeast corner of Esters Boulevard and West Royal Lane

LOGO

FLOWSERVE CORPORATION

5215 N. O’CONNOR BLVD

SUITE 2300

IRVING, TX 75039

VOTE BY INTERNET - www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

M44920-P21773 KEEP THIS PORTION FOR YOUR RECORDS

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

DETACH AND RETURN THIS PORTION ONLY

FLOWSERVE CORPORATION

For

Withhold

For All

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

Vote on Directors

All

Except

1. Election of Directors – 2015

Nominees:

01) Mark A. Blinn

02) Roger L. Fix

03) David E. Roberts

04) James O. Rollans

Vote on Proposals

For

Against

Abstain

2. Advisory vote on executive compensation.

3. Approve an amendment to the Restated Certificate of Incorporation of Flowserve Corporation to eliminate the classified structure of the Board of Directors.

4. Approve an amendment to the Restated Certificate of Incorporation of Flowserve Corporation to provide shareholders the right to call a special meeting of shareholders.

5. Ratify the appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for 2012.

THE BOARD OF DIRECTORS RECOMMEND A VOTE “FOR” ALL ITEMS

For address changes and/or comments, please check this box and write them on the back where indicated.

Please indicate if you plan to attend this meeting.

Yes

Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer.

The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned Shareholder(s). If no direction is made, this proxy will be voted “FOR” all items. If any other matters properly come before the meeting, or if cumulative voting is required, the person named in this proxy will vote in their discretion.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

YOUR VOTE IS IMPORTANT

Regardless of whether you plan to attend the 2012

Annual Meeting of Shareholders, you can be sure the shares

are represented at the meeting by voting online or promptly

returning the proxy in the enclosed envelope.

Proxy card must be signed and dated on the reverse side.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.

M44921-P21773



				THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

				2012 ANNUAL MEETING OF SHAREHOLDERS
				May 17, 2012

		The undersigned shareholder(s) hereby acknowledge(s) receipt of the Notice of 2012 Annual Meeting of Shareholders dated April 5, 2012 and the accompanying Flowserve Corporation Proxy Statement, and hereby appoint(s) MARK A. BLINN and JAMES O. ROLLANS, and each of them, with full power to act without the other, as proxies with full power of substitution, to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of Flowserve Corporation that the shareholder(s) is/are entitled to vote at the 2012 Annual Meeting of Shareholders of Flowserve Corporation to be held at 11:30 a.m. on Thursday, May 17, 2012, at the Flowserve Corporation Global Technology and Training Center, 4343 West Royal Lane, Irving, Texas 75063, and any adjournment or postponement thereof.
		THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED SHAREHOLDER(S). IF NO SUCH DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED BY THE PROXIES FOR THE ELECTION OF ALL NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS AND FOR EACH PROPOSAL, AND IN THEIR DISCRETION FOR SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
				PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE

				Address Changes/Comments:




				(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) CONTINUED AND TO BE SIGNED ON REVERSE SIDE