This excerpt taken from the ALL DEF 14A filed Apr 2, 2007.
Annual Cash Incentive Awards
We maintain two stockholder-approved plans under which executive officers have the opportunity to earn an annual cash incentive award based on the achievement of performance measures over a one-year period. The Annual Covered Employee Incentive Compensation Plan governs awards to the five executive officers whose compensation (other than performance-based compensation) in excess of
$1 million per year is not deductible by us. Annual cash incentive awards to all other executive officers are governed by and made under the Annual Executive Incentive Compensation Plan. These annual incentive plans are designed to provide all of the executive officers with a cash award based on a combination of corporate and business unit performance measures for each of our main business units: Allstate Protection, Allstate Financial, and Investments. The same performance measures apply to both plans.
For 2006, the Compensation and Succession Committee adopted corporate and business unit level annual performance measures and weighted them as applied to each of the named executives in accordance with their responsibilities for our overall corporate performance and the performance of each business unit. There are multiple performance measures for each business unit and each measure is assigned a weight expressed as a percentage of the total annual cash incentive award, with all weights for any particular named executive adding to 100%. The weighting of the performance measures at the corporate and business unit level for each named executive is shown in the following table.
ANNUAL CASH INCENTIVE AWARD PERFORMANCE MEASURES AND WEIGHTING
For each performance measure, the Committee approved a threshold, target, and maximum goal. The following table lists the performance measures and related target goals for 2006 as well as the actual results. The performance measures were designed to focus executive attention on key strategic, operational, and financial measures including top line growth and profitability. The target goals require the achievement of, and are designed to promote, better than industry average performance. A description of each performance measure is provided under the "Performance Measures" caption at the end of this CD&A.
Target award opportunities approved by the Committee are stated as a percentage of annual base salary. Award opportunities for the named executives are capped at 300% of the target awards. Annual cash incentive awards are calculated using base salary, as adjusted by any merit and promotional increases granted during the year on a prorated basis. For 2006, the annual target award opportunities for the named executives, as a percentage of base salary, were as follows: Mr. Liddy-120%, Messrs. Hale and Simonson-80%, Mr. Sylla-90% and Mr. Wilson-100%.
In calculating the annual cash incentive awards, our achievement with respect to each performance measure is expressed as a percentage of the target goal, with interpolation applied between the threshold, target, and maximum goals. That percentage is multiplied by the weight assigned to that performance measure for an executive and the resulting percentage is multiplied by the executive's target award opportunity. The amount of each executive's annual cash incentive award is the sum of these calculations for each performance measure, unless otherwise adjusted by the Committee. Annual cash incentive awards based on the achievement of the performance measures for 2006 are included in the amounts reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 29 and broken out separately from long-term cash incentive awards in a footnote to that table. In addition, the target and maximum annual award opportunities for 2006 are included in the Estimated Future Payouts under Non-Equity Incentive Plan Awards column in the Grants of Plan-Based Awards table on page 32.