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GIS » Topics » Tax Deductibility of Compensation

This excerpt taken from the GIS DEF 14A filed Aug 14, 2007.

Tax Deductibility of Compensation

Our Executive Incentive Plan and the 2005 Stock Compensation Plan have each been structured with the intention that cash incentive payments, restricted stock units and stock options awarded under these plans can be qualified performance-based compensation, which is tax-deductible to the Company under Section 162(m) of the Internal Revenue Code. In this Proxy Statement, we are proposing that stockholders approve the 2007 Stock Compensation Plan, which provides for performance-based compensation that qualifies for tax deductibility under Section 162(m). 

Alternative Summary Compensation Table

In order to illustrate the link between our executive pay programs and our corporate performance for fiscal 2007, the “Stock Awards” and “Option Awards” columns in this table use the grant date fair value of the annual and long-term incentive equity awards that were earned for fiscal 2007 performance but granted after fiscal year end. Other information, including footnotes, remain identical to those presented in the Summary Compensation Table which follows this table. The Summary Compensation Table presents the compensation cost that we reported in our financial statements for fiscal 2007 for multiple years of equity awards, as required by the SEC rules, but does not include the equity awards that were granted after fiscal year end.



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Table of Contents

ALTERNATIVE SUMMARY COMPENSATION TABLE

Name and
Principal Position 		    Year     Salary
($) 		    Bonus
($) 		    Stock
Awards(1)
($) 		    Option
Awards(2)
($) 		    Non-
Equity
Incentive
Plan
Compensation
($) 		    Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
($) 		    All Other
Compensation
($) 		    Total
($) 		 
S.W. Sanger
Chairman and CEO		         2007       1,241,250       —       3,368,608       4,962,750       2,513,531       3,447,582       520,398       16,054,119  
J.A. Lawrence
Vice Chairman and CFO		         2007       660,000       —       1,070,096       1,455,740       980,100       395,889       184,203       4,746,028  
K.J. Powell
President and COO		         2007       700,000       —       1,280,211       1,654,250       1,323,000       940,128       197,821       6,095,410  
R.G. Darcy
EVP, Worldwide
Operations and
Technology		         2007       500,000       —       721,824       992,550       675,000       623,359       146,872       3,659,605  
J.J. Rotsch
EVP, Worldwide
Sales & Channel
Development		         2007       500,000       —       718,296       992,550       666,000       780,641       158,524       3,816,011  
(1) Grant date fair value of each restricted stock unit earned in fiscal 2007 equals the closing price of our common stock on the New York Stock Exchange on the grant date June 25, 2007 ($58.79). The values shown have not been adjusted to reflect that these units are subject to forfeiture.
(2) Grant date fair value of options earned in fiscal 2007 equals $10.18 per share based on the Black-Scholes option-pricing model. The following unaudited assumptions were used in the calculation: options will be held for eight years; dividend yield of 2.7% annually; a risk-free interest rate of 5.1%; and expected price volatility of 14.8%. The values shown have not been adjusted to reflect that these options are subject to forfeiture.

The equity awards included in the Alternative Summary Compensation Table are:

"Tax Deductibility of Compensation" elsewhere:

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