This excerpt taken from the HPQ DEF 14A filed Jan 27, 2010.
As the world's largest technology company, Hewlett-Packard requires uniquely talented executives who are able to manage the company in a way that creates both short- and long-term value for stockholders. HP's mission is to invent technologies and deliver services that drive business value, create social benefit and improve the lives of customerswith a focus on positively impacting the greatest number of people possible.
The HR and Compensation Committee of the Board of Directors (the "Committee") believes that the degree to which HP fulfills its mission is highly dependent upon the long-term retention and effective motivation of its executives. As such, the Committee spends a significant amount of time understanding the market for executive talent, the economic factors that affect HP, and HP's short- and long-term performance within this context. Ultimately, the amount of compensation awarded to HP's executives is determined based on HP's performance and what the Committee believes is in the best interests of stockholders. These decisions are supported by strong corporate governance practices and transparencyareas where HP has long been a leader.
Like most companies, HP uses a combination of fixed and variable compensation programs to help align the interests of HP's executives with its stockholders. HP's "pay-for-performance" philosophy forms the foundation of all of the Committee's decisions regarding compensation. Underlying these decisions is also the Committee's belief that the labor market for the type of executive talent HP requires is limited and that HP's executives are among the most capable, highest performing executives available regardless of the industry. This compensation philosophy is central to HP's ability to attract and retain the motivated and talented individuals who have driven superior financial results for HP and its stockholders.
Each year the Committee, along with HP management, establishes aggressive targets that require the achievement of significant financial performance. At the end of each year, the Committee determines compensation by assessing performance against financial targets, relative peer performance and other non-financial goals. This approach has been consistently used over time and has helped to ensure stability within HP's executive leadership through a period of tremendous growth and transformation and an ever-changing economic environment.
The following pages of this Compensation Discussion and Analysis (this "CD&A") include the following:
The compensation tables appear immediately following this CD&A.