This excerpt taken from the HSY DEF 14A filed Mar 10, 2005.
Executive Compensation Philosophy
The Companys executive compensation program is designed to meet the following objectives:
Each year the Committee conducts a full review of the Companys executive compensation program. The annual compensation review permits an ongoing evaluation of the link between the Companys performance and its executive compensation in the context of the compensation programs of other companies. This review is performed periodically with the assistance of an independent outside consultant whom the Committee reserves the right to select and/or meet with independently at its discretion. This annual review includes analyzing survey data comparing the competitiveness of the Companys executive compensation, Company performance, stock price appreciation and total return to
In the review of survey data, a statistical process involving regression analysis is used to determine competitive compensation levels. This approach adjusts compensation levels for factors such as net sales, return on equity and time in position within the organization to determine predicted values or going rates within the marketplace for each element of compensation. The Company targets total compensation at or above such going rates.
The Committee believes the holding of significant equity interests in the Company by management aligns the interests of stockholders and management. Through the programs described in this report, a very significant portion of each executive officers total compensation is linked directly to individual and Company performance and to Common Stock price appreciation.
The key elements of the Companys executive compensation program consist of base salary, an annual cash incentive program, and a long-term incentive program consisting of performance stock units and stock options. Restricted stock unit (RSU) awards are also utilized as special incentive awards and to replace compensation forfeited by newly-hired executive officers and key managers of the Company as a result of their resignation from prior employers.
Incentives play an important role in motivating executive performance and in aligning executive pay practices with the interests of stockholders. The Companys executive compensation program is intended to reward achievement of both short- and long-term business goals. To ensure proper balance in the achievement of these business goals, the incentive program places greater dollars at risk in long-term incentives compared to short-term incentives. The long-term incentive program is designed especially to ensure that the Companys executive officers have a significant portion of their total compensation tied to factors that affect the performance of the Companys Common Stock.
The Committee developed the individual and corporate goals and objectives relevant to the compensation of R. H. Lenny in 2004, evaluated Mr. Lennys performance in light of those goals and objectives, and recommended to the independent directors of the full Board as a group Mr. Lennys 2004 compensation on the basis of that evaluation. The Committee also reviewed and approved the total compensation of the most highly-compensated executive officers other than Mr. Lenny, including those individuals whose compensation is detailed in this Proxy Statement. This is designed to ensure consistency throughout the executive compensation program.
The Committees policies with respect to each of the elements of the executive compensation program, including the basis for the compensation awarded to Mr. Lenny, are discussed below. While the elements of compensation are described separately below, the Committee considers the total compensation package afforded by the Company when determining each component of the executive officers compensation, including pension benefits, supplemental retirement benefits, insurance and other benefits.