This excerpt taken from the CPWM DEF 14A filed May 17, 2006.
Compensation Program for Fiscal 2005
We annually review the compensation of our executive officers on the basis of each executives responsibility, position and level of experience. In conducting our review, a compensation consulting firm provides us with competitive peer company compensation survey data that we consider in making our final determinations. The sources for this data were a focused industry-specific peer group of 11 companies, a peer group of similarly-sized companies with low margin and significant international operations, and a position-specific published survey analysis. Our total direct compensation program consists of base salary, annual cash incentive opportunity (the Management Incentive Plan) and long-term equity-based incentive opportunity, as follows:
The Company has also entered into employment severance agreements with its executive officers. We believe that these agreements are an important factor in attracting and retaining our key executives. These agreements provide for payments to the executive in certain circumstances upon their involuntary termination, including termination following a change of control of the Company. A more complete description of these agreements can be found in the Executive Compensation section of this Proxy Statement under the caption Employment and Related Agreement; Change-in-Control Arrangements.
The Company has maintained a nonqualified deferred compensation plan for executive officers and other highly compensated employees of the Company. The purpose of the plan was to provide a tax-deferred capital accumulation program through the deferral of salary and bonuses for a select group of participants. The amount of deferred compensation for each participant in the plan was credited to a recordkeeping account and each participant was 100% vested in his or her entire account at all times. Effective March 1, 2006, the Company amended the plan to freeze all contributions to the plan and to pay all accounts to participants in a lump sum as soon as administratively practicable following February 28, 2007. The Company is terminating the plan due to the complexities and restrictions imposed on such plans by Section 409A of the Internal Revenue Code, which was enacted as part of the American Jobs Creation Act.