This excerpt taken from the F DEF 14A filed Apr 4, 2008.
The compensation of our executive officers for 2007 was intended to focus executive performance on achieving important business objectives. Our 2007 performance against metrics for our performance-based programs indicates that we made significant progress in our objective of returning to automotive profitability by 2009, which we refer to as our turnaround plan in this analysis. Our executives, including the Named Executives, demonstrated exemplary leadership in driving our 2007 performance. The following brief discussion of our compensation philosophy and objectives provides you with the framework within which compensation programs were developed. The discussion of the Companys compensation objectives and business strategy provides you with background of those areas that were determined to be important in moving the Company forward in its goal of achieving automotive profitability in 2009.
A. Compensation Philosophy
Our Compensation Committee has adopted the following Philosophy Statement with respect to all salaried employees:
Compensation and benefits programs are an important part of the Companys employment relationship, which also includes challenging and rewarding work, growth and career development opportunities, and being part of a leading company with a diverse workforce and great products. Ford is a global company with consistent compensation and benefits practices that are affordable to the business.
Pay for performance is fundamental to our compensation philosophy. We reward individuals for performance and contributions to business success. Our compensation and benefits package in total will be competitive with leading companies in each country.
In addition, the Committee has approved the following Strategy Statement:
Compensation will be used to attract, retain, and motivate employees and to reward the achievement of business results through the delivery of competitive pay and incentive programs. Benefits provide employees with income security and protection from catastrophic loss. The Company will develop benefit programs that meet these objectives while minimizing its long-term liabilities.
The Philosophy and Strategy Statements are reviewed by the Committee on a regular basis. In 2006, the Committee amended the Strategy Statement to include retention of employees as an objective to emphasize the importance of this goal as we execute our turnaround plan. There were no changes to the Philosophy and Strategy Statements in 2007.
B. Compensation Objectives and Business Strategy
Consistent with the statements above, our compensation programs are designed to:
As noted above, one of the primary objectives of our compensation program is to drive executive behavior to accomplish key strategic goals. The Compensation Committee, in consultation with the Executive Chairman, the President and Chief Executive Officer, and the Group Vice President Human Resources and Labor Affairs,
determined that emphasizing certain metrics in performance-based incentive plans would best assist in our turnaround efforts.
Our President and Chief Executive Officer, Alan Mulally, announced the following four strategic priorities for our business:
1. Aggressively restructure our business to operate profitably at current demand and changing model mix.
2. Accelerate the development of new products our customers want and value.
3. Finance our plan and improve our balance sheet.
4. Work together effectively as one team.
Given these priorities and our financial performance in 2006, the Committee decided to emphasize global and business unit profitability, as well as total Automotive operating-related cash flow and cost performance metrics in our incentive plans for 2007. These metrics support the goals of aggressively restructuring our business to operate profitably, as well as financing our plan and improving our balance sheet. Additionally, similar to 2006, the Committee again emphasized quality and market share metrics in our incentive programs. These metrics support our goals of accelerating the development and introduction of new products our customers want and value. As discussed in greater detail below, performance in these critical areas in large part drove the compensation decisions for Named Executives for 2007. For more detail on these metrics and how they were used in our incentive programs refer to Annual Compensation B. Incentive Bonuses on pp. 34-37 and Equity-Based Compensation A. Annual Performance Unit and Stock Option Grants and C. Senior Executive Retention Program on pp. 39-42.