This excerpt taken from the CTWS DEF 14A filed Apr 2, 2009.
Performance Objectives and Annual Incentive Awards Though the Performance Stock Plan (PSP)
We use annual incentives through the PSP to reward our executive officers, including the NEOs, for the Companys annual performance in achieving pre-established financial and strategic goals set at both the Company level and the individual level. In the Fall of each year, based on Mr. Thornburgs recommendations for his direct reports, the Committee establishes the target annual incentive award opportunity for each executive salary grade and approves the performance objectives for the upcoming performance year and reviews those actions with the Board. All references to Mr. Thornburgs recommendations relate to executives other than himself. All decisions related to Mr. Thornburg are made by the Committee and are reviewed with the Board in accordance with the Committees Charter.
Threshold, Target and Maximum Award Opportunities
The Committee establishes a threshold, target, and maximum incentive amount for each NEO expressed as a percentage of the salary range midpoint for the Annual and Long-Term Awards as detailed in the table following. These amounts have been stable for the years 2004 through 2008 but have been revised for the 2009 plan year based on the advice of the Consultant, its evaluation of competitive market data and internal equitability. The PSP is intended to pay fully competitive annual cash compensation and provide competitive longer-term stock compensation awards when performance against goals matches the target level. Performance against any objective that is below threshold will result in no award being paid for such objective. However, the Committee has the authority in determining the amounts of Annual and Long-Term Awards, to modify the mathematical results (for example, in a year in that an event beyond managements control, such as extremely wet conditions, were to decrease revenues and earnings significantly) when the Compensation Committee, exercising its sound business judgment, deems it prudent to do so.
Based on Mr. Thornburgs recommendations, the Committee approves the financial and strategic performance objectives for each executive officer, including each other NEO. In selecting the financial performance objectives, the Committee sought to have the executives focus on the Companys operating financial performance, including in 2008, target earnings per share of $1.12 at a weight of 60%, customer satisfaction, employee satisfaction and customer growth targets at a weight of 20% and individual objectives at a weight of 20%. These individual
objectives were set to reward each executive for actions directly related to his or her own activities and to reinforce accountability.
2008 Performance Process
In executive session, the Committee selected and weighted Mr. Thornburgs goals, taking into consideration the Companys current financial and strategic priorities. The Committee recognizes that earnings per share should be emphasized, but also that performance against this metric may not be reflected in a single 12-month period. For 2008, 60% of Mr. Thornburgs Annual Incentive Award opportunity was based on the Committees assessment of the Companys total financial performance. This weighting was raised from 50% in 2007. Each of these goals are further defined by identifying the Threshold level of performance (80%), Target or expected performance (100%) and Maximum level of performance (120%). Mr. Thornburgs financial performance for 2008 was measured by the following metrics:
The remaining 40% of his award opportunity was based on the Committees assessment of the following strategic goals:
The Committee selected these strategic goals based on its judgment that they represent areas where Mr. Thornburg should focus his energies to drive the Companys business forward. Mr. Thornburgs goals were reviewed with the Board and his progress was periodically reviewed by the Committee and the Board during the year.
For 2008, annual incentives for our other NEOs were based on performance measured against a combination of financial goals and one or more strategic goals, related to the Companys business for the year, as follows: