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This excerpt taken from the MAS DEF 14A filed Apr 8, 2009. Cash
Compensation
Under our prior schedule, executive base salaries were reviewed
annually in July. In response to deteriorating market
conditions, and to continue the increased focus on
pay-for-performance
we have established over the last several years as discussed
below, executive base salaries were generally reduced by 5% in
2008, and frozen at those reduced levels, which we believe are
generally at or below the median base salary levels at our peer
group of companies, for two years. In light of this reduction,
the maximum opportunity levels under our annual cash and
restricted stock incentive bonus programs were increased by 30%.
These actions were not taken with respect to our President and
Chief Executive Officer and our Chief Operating Officer, whose
salaries were already set below the median pay of our peers when
they accepted their positions in 2007. Base salary is a major
factor in the formulas for performance-based cash bonuses and
performance-based restricted stock awards, as well as for
options and retirement benefits. Base salary provides current
compensation and is not typically adjusted on account of Company
performance, although on occasion salaries have been frozen or
reduced, as was done in July 2008.
During the past several years, and again in July 2008 as noted
above, we have reduced the percentage of total compensation
represented by base salary and have increased the variable
performance-based compensation opportunities in order to more
closely align executive compensation with our stockholders’
interests and our business objectives, and to reflect changes to
the mix of fixed versus variable compensation that had occurred
in the marketplace. As a result of this changed emphasis, in
four of the last six years our executive officers did not
receive increases in base salary, except in connection with
promotions and changes in responsibilities, or if salaries were
determined to be well below the competitive market level.
As a result of our emphasis on
pay-for-performance,
variable compensation represents an even larger percentage of
the aggregate of base salary plus cash bonus and restricted
stock award opportunities than it did previously, having been
increased from 67% to 72% for all named executive officers
except for Messrs. Wadhams, DeMarie and Manoogian. Variable
compensation remains at 86% for Mr. Wadhams and at 80% for
each of Messrs. DeMarie and Manoogian. Accordingly, our
President and Chief Executive Officer, our Chief Operating
Officer and our Executive Chairman have the most potential
compensation at risk of all of our executives.
Annual cash bonuses, shown in the “Non-Equity Incentive
Plan Awards” column of the Summary Compensation Table, are
determined under our annual cash bonus incentive compensation
plan. These performance-based bonuses are directly tied to
Company performance by linking executive officers’ annual
cash bonus opportunities to a schedule of earnings per share
targets. Under this program, an executive officer’s annual
performance-based cash bonus opportunity depends upon our
attained earnings for the year under a schedule of earnings per
share targets. The maximum bonus opportunity is 300% of base
salary for our President and Chief Executive Officer, 200% for
our Executive Chairman and for our Chief Operating Officer and
130% (increased from 100% as noted above) for our other
executive officers. There were no annual cash bonuses earned for
2008.
In the first quarter of each year, senior management and the
Committee review the Company’s forecasted performance
expectations for the year, taking into account general economic
and industry market conditions, and as a result of that review,
the Committee approves a graduated schedule of performance
targets for purposes of both the annual cash bonus and the
annual restricted stock incentive programs discussed below.
Earnings per share has historically been selected as the only
measure for determining incentive compensation because it
reflects the Company’s overall financial performance for
the year, although the annual restricted stock incentive program
has also taken into consideration progress toward improvement in
return on invested capital. Because of the importance of
operating earnings to stockholder value, reported earnings per
share is adjusted in establishing this schedule to exclude the
effects of special charges, gains and losses from corporate
divestitures, certain other non-operating income and expenses
and the benefit resulting from any stock repurchases in excess
of a predetermined amount. The Committee and senior management
periodically review this metric, and determined to add an
additional metric for 2009 and later years as discussed below.
Although we do not set specific financial or operational goals
within the areas of responsibility of our named executive
officers, the Committee may exercise negative discretion to
reduce bonuses regardless of the earnings target actually
attained.
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Under this graduated earnings per share schedule, as earnings
per share change, the incentive bonus for an executive officer
can vary between zero (if the Company fails to attain the
minimum target) and, for performance at or above the upper end
of the range, the maximum bonus opportunity as described above.
The maximum bonus the Company would pay under this schedule is
capped even if Company performance exceeds the maximum target,
and regardless of increases in stockholder value. The Committee
has adopted a policy that permits the Company at the
Committee’s discretion to recover all or a portion of the
performance-based cash bonuses paid to executive officers, if
the earnings per share or other performance criteria upon which
such bonuses were based were subsequently determined to be
incorrect and, if properly determined or applied, would have
reduced the size of the bonuses paid.
At the time the Committee established the 2008 bonus schedule
early in the year, the Committee expected that the adverse
impact of declining housing starts and decreased consumer
spending for home improvement products would be even greater in
2008 than it had been in 2007, but did not anticipate the
dramatic deterioration in general economic and market conditions
that occurred in 2008. The schedule established for 2008
provided for bonuses ranging from the maximum opportunity level,
if earnings per share (adjusted as described above) was at least
$1.70, to 20% of the maximum opportunity level, if adjusted
earnings per share was $0.70. Achieving the “target”
award level shown below would entitle the executive to receive
his target percentage; achieving the “maximum” award
level shown below would entitle the executive to receive his
maximum percentage. Since performance in 2008 did not exceed the
“threshold” award level shown below, no cash bonus was
earned.
This excerpt taken from the MAS DEF 14A filed Apr 7, 2008. Cash
Compensation
Annual cash compensation consists of base salary and a
performance-based bonus opportunity. We generally do not grant
discretionary ad hoc bonuses. Except for promotions, base
salaries generally are reviewed annually and adjusted effective
July 1 based on competitive factors and the MOR assessments
described above. The Committee determines the compensation of
our Executive Chairman, our President and Chief Executive
Officer, and our Chief Operating Officer. These executives
review reports prepared and compiled by our human resource
department as well as the MOR assessments and propose specific
base salary increases for the other executives, although no
changes are made until they are reviewed and approved by the
Committee. Base salary is a major factor in the formulas for
performance-based cash bonuses and performance-based restricted
stock awards, as well as for options and retirement benefits.
Base salary provides current compensation and is not typically
adjusted on account of Company performance, although on occasion
salaries have been frozen or reduced.
During the past several years, we have reduced the percentage of
total compensation represented by base salary and have increased
the variable performance-based compensation opportunities in
order to more closely align executive compensation with our
stockholders’ interests and our business objectives, and to
reflect changes to the mix of fixed versus variable compensation
that had occurred in the marketplace. As a result of this
changed emphasis, in three of the last five years, our executive
officers did not receive increases in base salary, except in
connection with promotions and changes in responsibilities (such
as those described above under “Leadership
Transitions”) or if salaries were determined to be well
below the competitive market level. Mr. Manoogian’s
base salary has not changed since 2003.
During 2007, the Committee considered the promotions of
Mr. Wadhams to Chief Executive Officer, Mr. DeMarie to
Executive Vice President and then to Chief Operating Officer and
Mr. Sznewajs to Chief Financial Officer (in addition to his
continuing responsibilities as Vice
President — Corporate Development and Treasurer).
In determining the appropriate corresponding compensation
adjustments, the Committee reviewed the compensation history for
each of the three executives, the compensation for the other
Company executives who had previously occupied these or
comparable positions, and market survey data using the peer
group as well as a report prepared by our human resources
department covering companies with over $5 billion in sales
in Hewitt’s executive compensation survey. The Committee
demonstrated its continuing commitment to pay-for-performance by
establishing base salaries for Messrs. Wadhams and DeMarie
at amounts less than their respective predecessors (and below
the median base pay offered by our peers and companies in the
Hewitt study) and by increasing the opportunity for both
executives to earn greater variable compensation depending on
Company performance. The Committee also increased
Mr. Sznewajs’ base salary in light of his additional
responsibilities and included him in the Supplemental Executive
Retirement Plan. The Committee approved the relocation
arrangements for Mr. DeMarie, which are discussed below in
more detail. Each of these executives received additional equity
awards as long-term incentives. Mr. Wadhams did not receive
any additional compensation when he became President and Chief
Executive Officer later in the year.
As a result of our emphasis on pay-for-performance, variable
compensation now represents an even larger percentage of the
aggregate of base salary plus cash bonus and restricted stock
award opportunities than it did previously, having been
increased from approximately 67% to approximately 86% for
Mr. Wadhams, and from 76% for his predecessor as Chief
Operating Officer to 80% for Mr. DeMarie. The variable
compensation for Mr. Manoogian and the other currently
employed named executive officers remains at 80% and 67%,
respectively. Accordingly, our Chief Executive Officer, our
Executive Chairman and our Chief Operating Officer have the most
potential compensation at risk of all of our executives.
Annual cash bonuses, shown in the “Non-Equity Incentive
Plan Awards” column of the Summary Compensation Table, are
determined under our annual cash bonus incentive compensation
plan. These performance-based bonuses are directly tied to
Company performance by linking executive officers’ annual
cash bonus opportunities to
a schedule of earnings per share targets. Under this program, an
executive officer’s annual performance-based cash bonus
opportunity depends upon our actual earnings for the year under
a schedule of earnings per share targets. The maximum bonus
opportunity is 300% of base salary for our Chief Executive
Officer, 200% for our Executive Chairman and for our Chief
Operating Officer and 100% for our other executive officers.
Mr. Barry, our former President and Chief Operating
Officer, had a maximum bonus opportunity of 160%.
In the first quarter of each year, senior management and the
Committee review the Company’s forecasted performance
expectations for the year, taking into account general economic
and industry market conditions, and as a result of that review,
the Committee approves a graduated earnings per share schedule
for purposes of the performance-based annual cash bonus. (This
same schedule is also used in connection with the annual
restricted stock incentive discussed below.) Earnings per share
has been selected as the measure for determining incentive
compensation because it reflects the Company’s overall
financial performance for the year. The Committee and senior
management also periodically review this metric. The calculation
of earnings per share for financial reporting purposes is
adjusted for certain transactions in order to focus primarily on
the Company’s operating performance for compensation
purposes. Consequently, in establishing this schedule, reported
earnings per share is adjusted to exclude the effects of special
charges, gains and losses from corporate divestitures, certain
other non-operating income and expenses and the benefit
resulting from stock repurchases in excess of a predetermined
amount. Although we do not set specific financial or operational
goals within the areas of responsibility of our named executive
officers, the Committee may exercise negative discretion to
reduce bonuses regardless of the earnings target actually
attained.
Under this graduated earnings per share schedule, as earnings
per share change, the incentive bonus for an executive officer
can vary between zero (if the Company fails to attain the
minimum target) and, for performance at or above the upper end
of the range, the maximum bonus opportunity as described above.
(As noted above we have not generally granted discretionary
bonuses, although the Company could do so if circumstances
warranted it, notwithstanding that the minimum target was not
attained.) The maximum bonus the Company would pay under this
schedule is capped even if Company performance exceeds the
maximum target, and regardless of increases in stockholder
value. The Committee has adopted a policy that permits the
Company to recover all or a portion of the performance-based
cash bonuses paid to executive officers, if the earnings per
share or other performance criteria upon which such bonuses were
based were subsequently determined to be incorrect and, if
properly determined or applied, would have reduced the size of
the bonuses paid.
At the time the Committee established the 2007 bonus schedule
early in the year, the Committee expected that the adverse
impact of declining housing starts and decreased consumer
spending for home improvement products would be even greater in
2007 than it had been in 2006. The schedule established for 2007
provided for bonuses ranging from the maximum opportunity level,
if earnings per share (adjusted as described above) was at least
$2.20, to 20% of the maximum opportunity level, if adjusted
earnings per share was $1.15. This earnings per share range was
broader and lower than the range for 2006 to reflect the greater
uncertainties and deteriorating conditions for our industries.
The Committee recognized that this could result in executives
receiving larger bonuses for 2007 than they received for 2006
although 2007 attained earnings might be lower than in 2006.
However, the Committee determined that the 2007 bonus
opportunity schedule and lower earnings per share range would
nonetheless appropriately correspond to the Company’s and
management’s performance in light of the anticipated
difficult conditions in the Company’s markets. The
Committee retained the discretion to reduce bonuses otherwise
payable in accordance with the schedule if the anticipated
adverse conditions did not materialize. In early 2008, the
Committee determined that adjusted earnings per share for 2007
was $1.72. Although the Company’s revenues for the year
declined seven percent and were lower than had been forecasted
when the bonus schedule was established at the beginning of the
year, the Company was able to mitigate a portion of this revenue
decline with headcount reductions and other cost containment
actions. The Committee noted that the actions taken by
management, which resulted in relatively flat gross margins in
2007 compared to 2006 and the generation of $980 million of free
cash flow, were critical to attaining this level of earnings per
share under these circumstances, and therefore, bonuses
generally approximating 62% of the maximum bonus opportunity
were appropriate. (The performance-based bonuses for 2006 and
2005 approximated on average 44% and 47.5%, respectively, of the
maximum opportunity.) The bonuses for Messrs. Wadhams,
DeMarie and Sznewajs were prorated to reflect the adjustments to
their compensation that were effected during the year.
Mr. Foley’s payment was prorated since he retired
mid-year.
This excerpt taken from the MAS DEF 14A filed Apr 10, 2007. Cash
Compensation
Annual cash compensation consists of base salary and a
performance-based bonus opportunity. Discretionary ad hoc
bonuses are generally not utilized. Except for promotions, base
salaries generally are reviewed annually and adjusted effective
July 1 based on competitive factors. During the past
several years, we have reduced the percentage of total
compensation represented by fixed salary and have increased the
variable performance-based compensation opportunities in order
to more closely align executive compensation with
stockholders’ interests. As a result of this strategy, in
recent years the fixed salary portion of compensation as a
percentage of the total of salary and maximum cash bonus and
incentive stock award opportunities has been reduced to
approximately 20% for Mr. Manoogian, 24% for
Mr. Barry, and 33% for the other named executive officers.
The Committee determines the compensation of the Chief Executive
Officer and the President. Our Chief Executive Officer and our
President propose specific base salary increases for the other
executives, although no changes are made until they are reviewed
and approved by the Committee. Our Chief Executive
Officer’s base salary has remained the same since 2003. In
2006, other executive officers generally received a modest
increase in base salary of 3.5%, except for Mr. Wadhams,
whose base salary increased approximately 11.9% to reflect his
individual performance and his increasing responsibility within
the Company.
Annual cash bonuses, shown in the “Non-Equity Incentive
Plan Awards” column of the Summary Compensation Table, are
determined under our annual cash bonus incentive compensation
plan. These performance-based bonuses are directly tied to
Company performance by linking executive officers’ annual
cash bonus opportunities to earnings per share targets. Under
this program, the percentage of an executive’s annual
performance-based cash bonus opportunity depends upon our actual
earnings for the year compared to the scheduled earnings per
share target. The percentage of cash compensation tied to
Company performance increases for our Chief Executive Officer
and President in light of their greater responsibilities for the
Company’s performance. As a result, the maximum bonus
opportunities for our Chief Executive Officer and our President
are 200% and 160%, respectively, of base salary and, for the
Company’s other executive officers, 100% of base salary.
Accordingly, our Chief Executive Officer and our President have
the most potential cash compensation at risk.
In the first quarter of each year, the Committee approves a
graduated earnings per share schedule for that year taking into
account general economic and industry market conditions and the
Company’s forecasted performance expectations for the year.
Earnings per share has been selected as a measure that generally
reflects Company performance, although the Committee and senior
management also periodically review this metric. The calculation
of earnings per share for financial reporting purposes is
adjusted for certain transactions prior to evaluating Company
performance for compensation purposes. Consequently, in
establishing the schedule for determining annual
performance-based cash bonuses, reported earnings per share is
adjusted to exclude the effects of special charges, gains and
losses from corporate divestitures, certain other non-operating
income and expenses and the benefit resulting from stock
repurchases in excess of a predetermined amount.
Under this graduated earnings per share schedule, as earnings
per share change, the incentive bonus for an executive officer
can vary between zero (if the Company fails to attain the
minimum target) and, for attainment of stretch goals, the
maximum bonus opportunity as described above.
Table of Contents
The maximum bonus the Company would pay under this program is
capped regardless of whether Company performance exceeds the
maximum target, as it did for 2004, and regardless of increases
in stockholder value. The Committee has adopted a policy that
permits the Company to recover all or a portion of the
performance-based cash bonus paid to executive officers, if the
earnings per share or other performance criteria upon which such
bonus was based were subsequently determined to be incorrect,
and if properly determined or applied would have reduced the
size of the bonus paid.
The schedule established for 2006 provided for bonuses ranging
from the maximum opportunity level if earnings per share,
adjusted as described above, attained or exceeded $2.55 to 20%
of the maximum opportunity level if adjusted earnings per share
were at least $2.00. During 2006 after a relatively strong first
half, our businesses were adversely affected by declining
housing activity, a decrease in consumer spending and continued
increases in commodity costs. Adjusted earnings per share were
determined to be $2.24, which principally excludes the impact of
goodwill and financial investment impairment charges as well as
expenses related to profit improvement initiatives in the
Company’s plumbing and cabinet businesses. The executive
officers, including Mr. Manoogian, received cash bonuses
generally approximating 44% of the maximum bonus opportunity,
compared with the performance-based cash bonuses for 2005 and
2004 when executives received on average 47.5% and 100%,
respectively, of the maximum amount.
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