MOLX » Topics » Merit Bonuses

This excerpt taken from the MOLX DEF 14A filed Sep 10, 2007.

Merit Bonuses

The purpose of the merit bonus is to provide a competitive annual cash incentive opportunity that rewards both Molex performance toward corporate growth objectives and also individual achievements. The merit bonus is a short-term annual incentive paid in cash pursuant to arrangements that cover all executive officers, including the CEO, and provide that a bonus will be paid upon the achievement of two performance metrics: a quantitative performance measure that makes up 80% of the bonus, and performance against previously defined individual goals, which makes up the remaining 20%. The Compensation Committee selects the performance measure at the beginning of each fiscal year. For fiscal year 2007, profit-before-tax (PBT) was selected as the performance measure because it encourages management to focus on all aspects of performance, including top-line growth in revenue and bottom-line results.

Individual performance goals are also established by the Compensation Committee and the CEO at the beginning of each fiscal year. These individual performance goals may be based on a variety of factors, including internal budget goals, investor expectations, peer company results, prior year Molex performance, upcoming fiscal year business plans, and strategic initiatives. Each officer’s performance against individual goals is assessed at the end of the fiscal year. The Co-Chairmen of the Board are not assigned individual performance goals—the Compensation Committee determines, in its sole discretion, the percent of base salary that should be awarded to each of the Co-Chairmen under this component based upon their special contributions.

For fiscal year 2007, the Compensation Committee set the PBT threshold at 90% of budgeted PBT. The Compensation Committee also determines in advance the bonus targets and bonus maximums that can be achieved and sets corresponding performance measures. Bonus targets generally correspond to the median of the published surveys utilized by the Compensation Committee and management. The

 

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target award opportunity for our CEO is equal to 75% of salary, and the target award opportunities for other executive officers range from 50% to 60% of base salary. The maximum award opportunity for our CEO is equal to 150% of base salary, and the maximum award opportunities for other executive officers range from 100% to 120%. The Compensation Committee considers Molex’s performance against the performance measure and its assessment of each officer’s performance against individual goals to determine the amount of merit bonus to be paid out.

For fiscal year 2008, the Compensation Committee selected year-over-year growth in operating income (before restructuring charges) as the performance measure for merit bonus arrangements because it is the key measure being used to evaluate our divisions under our new global operating structure. The Compensation Committee did not set a threshold performance level; any improvement in operating income as compared to fiscal year 2007 will result in the payment of some level of cash merit bonus.

This excerpt taken from the MOLX DEF 14A filed Sep 13, 2006.
Merit Bonuses

The merit bonus is a short-term annual incentive paid in cash pursuant to a plan that covers all executive officers, including the CEO, and provides that a bonus will be paid upon the achievement of two performance metrics: a profit-before-tax (PBT) goal and performance against previously defined individual goals. Under the plan, the Committee determines the target bonus opportunity for each executive officer based on the achievement of minimum, target and maximum performance goals. The bonus opportunity for executive officers ranges from 25% to 150% of salary. The PBT metric is not discretionary, but the individual goal metric is discretionary based on the Committee’s evaluation of the executive officer’s performance. The Co-Chairmen of the Board are not assigned individual goals - the Committee determines, in its sole discretion, the percent of base salary that should be awarded to each of the Co-Chairmen under this metric.     

Bonus payments to executive officers may be more or less than the target bonus as a function of Molex’s results and individual performance. If the minimum performance goals are not achieved, no bonus is payable under the plan. The Committee, in its discretion, may downwardly adjust the potential bonus award to a lesser percentage in the event of certain circumstances. In addition, the Committee, in its discretion, may award an additional percentage not to exceed 30% of base salary to reflect exceptional contributions to Molex. In July 2006, the Committee awarded merit bonuses to executive officers for fiscal year 2006 based on the two metrics described above. The merit bonuses paid to the named executive officers for fiscal year 2006 are included in the Summary Compensation Table.

     Long-Term Incentives

Molex awards a combination of stock options and stock bonus awards to focus executive officers on long-term value creation and the achievement of key performance goals. Under the terms of the applicable equity plan, executive officers receive stock options that provide them with the right to buy a fixed number of shares of Molex Class A Common Stock at the fair market value of the stock on the grant date. Generally, options vest ratably over four years beginning on the first anniversary of the grant date. Stock bonus awards are grants of shares of Molex Class A Common Stock – they are the functional equivalent of restricted stock and there is no cost to executive officers for these awards. Generally, stock bonus awards vest ratably over four years beginning on the first anniversary of the grant date. The stock options and stock bonus awards granted to the named executive officers for fiscal year 2006 are included in the Summary Compensation Table and/or the Option Grants Table.

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