This excerpt taken from the LII DEF 14A filed Apr 15, 2008.
Executive Compensation Philosophy and Key Objectives
We believe our ability to execute our business strategy and achieve desired results is dependent on our executives demonstrating the behaviors needed to achieve our goals. To that end, we maintain a pay-for-performance compensation philosophy. Where financial results exceed expected performance, monetary rewards will reflect this performance. Where financial results are below expected performance, pay levels will reflect the below-target performance results. During 2007, individual performance was not measured in our annual short-term incentive programs; rather, we focused these annual programs solely on objective company performance results. However, individual performance, measured by achievement of individual performance objectives, such as contribution toward company performance results and growth, execution of business strategies or implementation of strategic priorities, was considered for base salary administration, promotional opportunities and long-term incentive awards.
The strategic objectives of our executive compensation program include:
For 2007, the Committee administered base salary for our NEOs with the 50th percentile of the marketplace as the guideline in order to attract and retain key executive talent. The Committee administered short-term incentive opportunities and long-term incentive delivered value with the 65th percentile of the marketplace as the guideline and included appropriate stretch performance goals, allowing us to maintain a strong pay-for-performance link and attract and retain leadership talent. While the Committee has not established a formal policy for allocating between cash (base salary and short-term incentives) and non-cash (long-term incentives) compensation, the Committee has historically granted a majority of total compensation to our NEOs in the form of long-term incentive awards, as was the case in 2007. The graphs below illustrate the 2007 targeted mix of compensation for the CEO and the average target compensation mix for the other NEOs.