This excerpt taken from the IBKC DEF 14A filed Apr 2, 2007.
Base salary is intended to provide a level of income commensurate with an executives position, responsibilities, and contributions to the Company. Base salary ranges are established using a specific cross section of financial institutions of similar market capitalization and revenues developed by Hay Group, as well as other relevant market data. Executive positions are
individually benchmarked annually against these survey sources to establish a competitive salary range for each position, which is typically targeted to be at or slightly above the median of the survey results.
The actual base salary of each executive officer relative to the target established above is determined by the executives performance, which is evaluated annually by the President and Chief Executive Officer and reviewed by the Committee. In the case of the President and Chief Executive Officer, the Committee also considers the performance of the Company during the prior years during which he has held his position, and the difficulty of replacing the President and Chief Executive Officer with someone of comparable experience and skill. Based on these factors, the Committee established the President and Chief Executive Officers base salary at $446,900 per year on February 27, 2006. Salaries for the named executive officers are set forth on the Summary Compensation table.
The Committee adjusted salaries for 2007 for the named executive officers. Mr. Byrds salary was adjusted to $467,010 as of February 26, 2007. Mr. Browns salary was adjusted to $285,000 on October 1, 2006 and to $310,000 on January 15, 2007 in connection with his relocation to Arkansas and his expanded responsibilities for all markets in Louisiana and Arkansas. Mr. Davis salary was adjusted to $285,000 on October 1, 2006. Mr. Naquins salary was adjusted to $240,000 on March 12, 2007. Mr. Restels salary was adjusted to $195,000 on October 1, 2006.
We pay a base salary because it provides a basic level of compensation and is necessary to recruit and retain executives. An important aspect of base salary is the Committees ability to use annual base salary adjustments to reflect an individuals performance or changed responsibilities.
As discussed above, the Committee places a greater emphasis on targeting the total amount of direct compensation to peer practices and emphasizes a mix of compensation weighted towards variable compensation. At lower executive levels, base salaries represent a larger proportion of total compensation. At senior executive levels, base salaries progressively represent a smaller proportion of total compensation, which includes larger variable compensation opportunities.
Base salary levels are also important because we generally tie the amount of incentive compensation and retirement benefits to an executives base compensation. For example, long-term incentive awards are denominated as a percent of ones base salary.