This excerpt taken from the IM DEF 14A filed Apr 23, 2008.
Factors in Designing and Determining Levels of Executive Compensation
The primary focus in setting compensation levels is to approximate the competitive market by targeting the market median; the primary basis for making payouts is achievement of financial results aligned with shareholder interests. The Committee has established a program designed to keep it abreast of emerging trends and asks its consultant to report on these trends on a regular basis. This includes the use of equity compensation including the prevalence of specific incentive vehicles, the goals used in incentive programs, and the relative importance of each component of compensation. In some cases, officer incentive opportunities have been adjusted from market for internal consistency but market practice is preeminent in setting overall compensation levels. Performance versus pre-established goals is the most important factor in making actual awards.
Benchmarking. Generally, the Company uses benchmarks in determining executive officer compensation annually against a comparator group of companies. Ingram Micro management engages an executive compensation consulting firm to conduct a total compensation study of its executive officers. For 2007, Hewitt collected and reported the survey data which was then reviewed by Cook. Cook provided the Committee with its own analysis and conclusions to be drawn from the data and advised the Committee on setting appropriate compensation levels for Ingram Micros executive officers including the Chief Executive Officer.
The Company reviews the comparator group of companies each year. Historically, we have been challenged in defining an appropriate comparator group against which to benchmark our executive officers compensation. Although we have direct competitors, this is a small group, some of whom have revenue that is substantially less than Ingram. We have attempted to use a limited number of peer companies in the past to benchmark both our executive officer compensation and financial performance but obtained inconsistent results from year to year due to the small number of companies included in the peer group. As a result, we now use a subset of the Fortune 500 in Hewitts database, because it represents the relevant labor market from which we recruit executive talent. The Fortune comparator group for the 2006 report, which was used by the Committee in making compensation decisions for 2007, consisted of 189 non-financial companies in Hewitts database with the following characteristics:
These companies had the following median scope measures:
2006 Comparator Group (189 companies) ($ in millions)
The compensation report examined the competitiveness of Ingram Micros executive compensation programs in total and by each element of compensation (base pay, annual incentives, and long-term incentives). In doing so, generally, the Committee compared the value of each of Ingram Micros executives compensation elements against the median information available from the defined comparator group. The Committee generally targeted the 50th percentile of the median information available from the defined comparator group, and used this information as one of the factors in making compensation determinations. Benefits and perquisites were not included in the 2006 or 2007 reports as they represent an insignificant portion of our executive officers total remuneration.