This excerpt taken from the ALGN DEF 14A filed Apr 9, 2008.
Awards to the named executive officers during year 2007.
The Compensation Committee awarded the cash incentive awards set forth below to the named executive officers during year 2007. These awards are also set forth in the Summary Compensation Table on page 34 under the heading "Non-Equity Incentive Plan Compensation."
Bonus awards to our named executive officers reflect Align's 2007 financial performance that significantly exceeded the projected results in our financial outlook for 2007 at the time the targets were set. These awards also reflect critical progress towards the achievement of our multi-year strategic plan, including the launch of Vivera in the last quarter of 2007 and delivering on our product roadmap with the planned launch of two new products (Invisalign ClinAssist and Invisalign Teen) in the latter part of 2008. We believe that these new and planned product offerings will enable us to access a larger share of the served market and build on our foundation for long-term growth. The awards to our named executive officers were also structured and paid out to reward high performing executives and employees who drove this exceptional corporate performance and thereby incent them to sustain this performance over a long career at Align. Although differences in bonus payouts among our executives were based in part on individual performance, we believe that individuals having a greater impact for achieving performance and strategic objectives should bear a greater proportion of the risk if those goals are not achieved, and therefore should receive a greater proportion of the reward if those goals are met or surpassed. As a result, Mr. Zoromski and Mr. Hedge, executives who have roles directly tied to revenue generation and the achievement of critical strategic priorities, received the highest percentage payout when compared to their target bonus. Mr. Zoromski had a direct impact on the implementation of the new product development process and pipeline and Mr. Hedge had a direct impact on new product development and product cost objectives and operating margin improvements. In addition, Mr. Arola became an executive officer in December 2007. Prior to becoming Chief Financial Officer, Mr. Arola's target bonus opportunity was 40% of his base salary and his 2007 bonus award was based on this target.
Although a predetermined percentage of the target bonus for each executive officer is based upon Align's achievement of corporate performance targets, the Committee does not believe that Align's performance and individual performance can be properly measured by an overly mechanistic cash incentive program, as factors outside the reasonable control of the management team can impact the company's or an entire industry's performance. For this reason, the Compensation Committee reserves the right to apply judgment in the final determination of cash incentive awards and can adjust actual results to exclude the impact of certain extraordinary items or events to more accurately reflect the overall performance of the management team.
The corporate performance targets for 2008 are substantially similar to the categories used in 2007 as set forth above. We believe that there is a reasonable likelihood that we will achieve our corporate performance targets in 2008 at the "target" level.