This excerpt taken from the HPQ DEF 14A filed Jan 20, 2009.
Overview of HP's Executive Compensation for Fiscal 2008
The completion of fiscal 2008 at HP marked the culmination of a three-year period during which HP produced record revenue, delivered double-digit earnings per share growth, and achieved exceptional financial performance when measured against a range of both internal and external metrics. During this time, HP underwent a significant transformation and significantly improved its cost structure, while at the same time becoming the market leader in both PC and server sales. This period also represents the first three full fiscal years of Mark Hurd's tenure as HP's Chief Executive Officer, and, during that period, HP's earnings per share grew almost 300% on a GAAP basis.
HP's compensation philosophy is to "pay for performance," and the compensation structure it has put in place is aligned with this philosophy. This compensation structure 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 over these last three years.
Like its peer companies, HP has both short- and long-term incentive compensation programs. The short-term incentive plan focuses on HP's annual performance. In fiscal 2008, HP reported double-digit earnings per share growth and achieved significant financial milestones despite deteriorating economic conditions worldwide.
HP's long-term incentive plan focuses on HP's performance over a three-year period. Fiscal 2008 was the conclusion of the first full three-year cycle that Mark Hurd and most of his management team have been in place. Fiscal 2006 through fiscal 2008 represented three years of record-breaking financial performance for HP, including a 37% growth in revenue and a 200% increase in GAAP operating profit compared with fiscal 2005. In the context of this growth and HP's overall superior financial performance, the amounts awarded to HP's executive team for fiscal 2008, as described in more detail below, reflectand appropriately rewardthis exceptional and sustained performance.