Page 170 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

156 The Complete Guide to Executive Compensation

Executive Compensation
Program objectives (what are the objectives of the executive compensation program?)
Program design (what is the executive compensation program designed to reward?)

Compensation elements?
• What is each element of compensation?
• Why does the company choose to pay each element? Namely, what is the rationale behind each
pay element?
• How does the company determine the amount—and, where applicable, the formula—for each
element?
• How does each element and the company’s decisions regarding that element fit into the
company’s overall compensation objectives and affect decisions regarding other elements?
Namely, what is the rationale behind the pay plan?
Director Compensation
(Same format as executive compensation)

Table 4-31. Possible Compensation Discussion and Analysis format

3. For long-term compensation, the basis for allocating compensation to each different
form of award (such as relationship of the award to the achievement of the registrant’s
long-term goals, management’s exposure to downside equity performance risk, corre-
lation between cost to registrant, and expected benefits to the registrant).
4. How the determination is made as to when awards are granted, including awards of
equity-based compensation such as options.
5. What specific items of corporate performance are taken into account in setting
compensation policies and making compensation decisions.
6. How specific forms of compensation are structured and implemented to reflect these
items of the registrant’s performance, including whether discretion can be or has been
exercised (either to award compensation absent attainment of the relevant performance
goal(s) or to reduce or increase the size of any award or payout), identifying any
particular exercise of discretion, and stating whether it applied to one or more specified
named executive officers or to all compensation subject to the relevant performance
goal(s).
7. How specific forms of compensation are structured and implemented to reflect the
named executive officer’s individual performance and/or individual contribution to
these items of the registrant’s performance, describing the elements of individual
performance and/or contribution that are taken into account.
8. Registrant policies and decisions regarding the adjustment or recovery of awards or
payments if the relevant registrant performance measures upon which they are based
are restated or otherwise adjusted in a manner that would reduce the size of an award
or payment.
9. The factors considered in decisions to increase or decrease compensation materially.
10. How compensation or amounts realizable from prior compensation are considered in
setting other elements of compensation (e.g., how gains from prior option or stock
awards are considered in setting retirement benefits).