This excerpt taken from the KFED DEF 14A filed Nov 20, 2007.
Compensation Discussion and Analysis. We believe the most effective executive compensation program is one that is aligned with achievement of our long-term strategic goals and we intend for our compensation program to align executives interests with those of the stockholders by rewarding performance for implementing our various strategies with the ultimate objective of improving stockholder value. We evaluate both performance and compensation to ensure that we maintain our ability to attract and retain employees in key positions and to ensure that compensation provided to key employees keeps these employees focused on value creation.
In this regard, we provide what we consider to be a competitive compensation package for the named executive officers comprised of a base salary, an annual incentive plan, a stock option plan, a recognition and retention plan, an employee stock ownership plan, a 401(k) Plan, and a deferred compensation program as well as health and welfare benefits. See Benefits.
The compensation committee is responsible for all compensation and benefit matters relating to the executive officers, including the evaluation and compensation of our president and chief executive officer. The president and chief executive officer evaluates the performance of the other named executive officers and recommends to the compensation committee the named executive officers compensation levels for approval. The compensation committee regularly evaluates and approves all compensation practices applicable to the named executive officers, including the president and chief executive officer.
Base Salary. It is our philosophy to maintain base salaries at levels comparable to the salaries paid by similar organizations. In establishing base salaries, we take into account each executive officers ability and experience as well as past and potential performance. On an annual basis, each executive officer is evaluated and their base salary may be adjusted based on market data as well as taking into account the above factors.
Annual Incentive Plan. The Annual Incentive Plan is an integral part of an executives total compensation package that recognizes the executives annual contribution to our success. The Plan is designed to: 1) support a business change to community-based banking; 2) support a culture change to pay-for-performance; 3) focus the executive team on annual goals to meet long-term goals; 4) reward
executives for their effort; and 5) align compensation with the goals of the organization and marketplace practices. The award is achieved only if Kaiser Federal Bank achieves a minimum return on average assets (ROA) which is set each year. If our return on assets goal is achieved, each individual executive must also achieve certain personal performance objectives set by the president and chief executive officer or the Board of Directors. One of these goals must address expense management. The president and chief executive officer is eligible to receive up to 30% of her annual base salary and the remaining named executive officers are eligible to receive up to 20% of their annual base salaries under this plan. In addition, the dollar amount of an award may be further increased over such maximums up to an additional 20% of the award to recognize achievement significantly in excess of performance objectives.
Equity Compensation. The compensation committee uses the award of stock options and restricted stock under the recognition and retention plan to align the interests of the named executive officers with those of our stockholders. At the annual meeting of stockholders in 2004, stockholders approved our stock option plan and recognition and retention plan. Ms. Hoveland, Ms. Huber, and Ms. Thompson received both stock options and awards from the compensation committee under each of those equity compensation plans during 2004. Mr. Luton received his stock options and stock awards when he became chief financial officer in November 2006. Both the stock options and the stock awards vest at a rate of 20% per year over five years commencing on the first anniversary of the award. The compensation committee believes that the five year vesting of stock options and restricted stock awards will focus senior management on long-term performance and stock appreciation. Except for Mr. Luton, no additional options or awards were granted to any of the named executive officers in the fiscal years ended June 30, 2006 and 2007.
Information regarding the outstanding stock option grants and unvested recognition and retention plan awards is included in the section titled Outstanding Equity Awards at Year End. For information regarding our expense related to the portion of each stock option and restricted stock plan award that vested during fiscal 2007, as calculated in accordance with Statement of Financial Accounting Standards (SFAS) No. 123(R), see Summary Compensation.
Benefit Plans. The compensation committee annually reviews the expense and appropriateness of all benefit plans for the named executive officers and all other employees. The benefit plans include a 401(k) plan, deferred compensation plan, employee stock ownership plan, and other benefit plans such as medical, dental, life and disability insurance.
The named executive officers are eligible to participate in a 401(k) Plan, which includes a match of up to 50% of the participants eligible contributions up to 10% of the participants salary. The match and the investment options are identical to those available to all other participants. Under the terms of our employee stock ownership plan, all named executive officers receive an annual allocation of our common stock based upon the participants eligible compensation up to $210,000. Participation levels for named executive officers are identical to those of all other employee stock ownership plan participants.
The named executive officers are eligible to participate in the nonqualified deferred retirement plan, which allows them to defer a portion of their compensation earned during the plan year. At our discretion, we have the ability to match the elective deferrals of the participants. However, we have not made any matching contributions to this plan since inception.
This excerpt taken from the KFED 10-K filed Sep 8, 2006.