This excerpt taken from the FBIZ DEF 14A filed Mar 31, 2006.
Report on Executive Compensation
The Compensation Committee of the Board is responsible for all aspects of the Companys compensation package offered to its corporate officers, including the named executive officers. The following report was prepared by members of the Compensation Committee.
The Compensation Committee maintains a philosophy that a significant element of compensation of the Companys executive officers must be directly and materially linked to operating performance. The compensation plans provided to the executive officers are designed to accomplish that goal. The overall objectives of the Companys compensation strategy are to make executive compensation generally competitive, with a substantial portion of such compensation contingent upon Company and individual performance, and to encourage equity ownership by the Companys executive officers so that their interests are closely aligned with the interests of shareholders.
During 2005, the Company retained a nationally-recognized compensation consultant to advise it with respect to compensation issues. The first step in the overall review of executive compensation was an analysis of the duties and responsibilities of each Company executive. Subsequently, the Companys consultant compared the compensation for each Company executive with general market data for individuals with comparable job responsibilities. The Companys consultant summarized its conclusions on Company executive compensation in a report presented to the Compensation Committee in July and in October 2005. The results of this study have provided, and will continue to provide in 2006, the framework for determining compensation for executives of the Company.
The key elements of the Companys executive compensation program consist of base salary, annual cash incentives and long-term equity incentive plan. A general description of the elements of the Companys compensation program, including the bases for the compensation awarded to the Companys Chief Executive Officer for 2005, are discussed below.
Base Salary. In setting base compensation, the Compensation Committee considers the overall performance of each executive with respect to the duties and responsibilities assigned him or her. In addition, periodic surveys are taken of compensation levels offered by other local and national community banks, bank holding companies, the Companys benchmark business banks, commercial finance companies, leasing companies, trust and investment companies and other industries in the Companys market area, which provide the Compensation Committee with information on which to evaluate salary and compensation programs.
Annual Cash Incentive. The Companys executive officers are eligible for annual cash incentive awards under the Companys incentive bonus plan. Under this plan, Company and individual performance objectives are established at the beginning of each year. Company performance objectives are based on the Company obtaining certain levels of growth and earnings. Individual performance objectives are oriented to long-term objectives of the Company, with stated goals and activities to achieve those objectives specified for each individual.
Long-Term Equity Incentive Plan. The 2006 Equity Incentive Plan and the 2001 Equity Incentive Plan are designed to encourage and create ownership of Common Stock by key executives, thereby promoting a close identity of interests between the Companys management and its shareholders. The 2006 Equity Incentive Plan and the 2001 Equity Incentive Plan are also designed to motivate and reward executives for long-term strategic management and the enhancement of shareholder value. The Compensation Committee has determined that stock option and restricted stock grants to the Companys employees, including key executive officers, are consistent with the Companys best interest and the Companys overall compensation program.
Stock options are granted with an exercise price equal to the market value of the Common Stock on the date of grant. Vesting schedules are designed to encourage the creation of shareholder value over the long-term since the full benefit of the compensation package cannot be realized unless stock price appreciation occurs over a number of years and the executive remains in the Companys employ.
The Compensation Committee has granted stock options to key executive officers. See above under Summary Compensation Information and Stock Options.
Chief Executive Officer Compensation. During 2005, the Companys Chief Executive Officer, Jerome J. Smith, was paid a salary of $278,460 and was awarded $89,052 of cash incentives. In evaluating Mr. Smiths performance during 2005, the Compensation Committee considered the Companys overall financial performance and the achievement of long-term objectives of the Company.
Section 162 (m) Limitation. The Company anticipates that all 2006 compensation to executives will be fully deductible under Section 162(m) of the Internal Revenue Code. Therefore, the Company determined that a policy with respect to qualifying compensation paid to executive officers for deductibility is not necessary.
FINANCIAL SERVICES, INC.
Gary E. Zimmerman,