This excerpt taken from the GMCR DEF 14A filed Jan 28, 2008.
Role of Compensation and Organizational Development Committee and CEO Transition
Our Compensation and Organizational Development Committee makes the final decision with respect to the amounts of compensation paid to our named executive officers based on the bulleted factors set forth above. The Committee also sets the mix of base salary, annual incentives and long-term equity incentives that our named executive officers receive and the financial and non-financial targets under our annual incentive plan. Compensation levels are set such that incentive compensation, both short- and long-term, represents at least 70% of the chief executive officers total compensation package and at least 50% for other named executives. To support our linkage between compensation and providing long-term value to shareholders, we provide more incentive opportunity to our executives through our shareholder approved long-term equity incentive plan than our short-term incentive plan. The long-term incentive opportunity is approximately 60% more than the short-term incentive opportunity.
We use tally sheets to review the compensation opportunity for the year and the mix of compensation elements for each executive. These tally sheets itemize each compensation element payable to our named executive officers and provide an estimate of amounts payable upon voluntary and involuntary termination and change of control. The tally sheets help the Committee to analyze compensation as a total package and provide an understanding of the level of payout each executive would receive in the event of termination. Since we have used tally sheets for a number of years, we did not find anything unexpected in our 2007 tally sheets. In the Committees review of compensation discussed throughout this report, the tally sheets were used as a general reference to ensure that our compensation programs meet our overall objectives and remain in line with our compensation philosophy.
Historically, the Compensation and Organizational Development Committee has relied primarily upon the recommendations of our founder and former chief executive officer, Robert Stiller, and our vice president of human resources and organizational development, Kathryn Brooks, in making final compensation decisions. Benchmarking studies of competitive compensation levels prepared by Mercer, a nationally recognized compensation consultant were used in developing these recommendations. Fiscal 2007 was a transition year in which Mr. Stiller focused more on finding a successor chief executive officer and participated less in compensation determinations.
In anticipation of moving from our founder serving as chief executive officer to a successor, the Compensation and Organizational Development Committee assumed a more robust role in the process of actively determining compensation. This trend comports with our board of directors belief that it is more appropriate, at this stage of our growth, to have the Compensation and Organizational Development Committee act as the driving force behind our compensation program. The Compensation and Organizational Development Committee will continue to consider recommendations of both our chief executive officer and the other members of our executive management team with respect to final compensation decisions as one factor in making compensation determinations. It is our policy that no named executive officer participates or makes recommendations regarding their own compensation.
In anticipation of the Companys chief executive officer transition, the Compensation and Organizational Development Committee undertook a complete review of our compensation program in fiscal 2007. The purpose of this review was to evaluate and improve upon the effectiveness of our compensation program and ensure its consistency with our compensation objectives and market practices. Following this review, the Board discussed and approved an Executive Compensation Plan that the Chief Executive Officer and Vice President of Human Resources will use as a guide for compensation management. The Compensation and Organizational Development Committee reviewed the compensation packages paid to each of our named executive officers considering the Companys compensation objectives and the bulleted compensation factors provided under the sub-heading Determining Compensation. The Compensation and Organizational Development Committee also utilized Mercer, to help perform a comprehensive review of our compensation practices in light of market standards. This review identified several areas that the Committee will further consider in future compensation decisions, such as developing consistent severance and change in control programs for the executives and determining whether the ongoing use of stock options as the primary equity vehicle continues to be appropriate.
For fiscal 2008, as Chief Executive Officer, Lawrence Blanford, in conjunction with Kathryn Brooks, Vice President of Human Resources and Organizational Development, prepared a recommendation for the Companys Senior Management based on in-depth analysis of market data, comparative internal fairness and individual performance consistent with the bulleted compensation factors set forth above under the sub-heading Determining Compensation. These recommendations were reviewed, discussed and approved by the Compensation and Organizational Development Committee.