This excerpt taken from the MOT DEF 14A filed Mar 13, 2009.
Independent Consultant Review of Executive Compensation
The Committee has the discretion, to the extent deemed necessary and appropriate, to retain and terminate compensation consultants, outside counsel or other advisors, including the sole authority to approve fees and other retention terms for any such consultant, counsel or advisor. The Committees practice is to engage an external independent consultant to complete an evaluation of our compensation program on a periodic basis, typically every one or two years, and to annually review the specific compensation of our Co-CEOs and our Co-CEOs senior leadership team.
The Committees current compensation consultant, Mercer, is independent from the Company and reports directly to the Chair of the Committee. The Committee believes that Mercer is presently the appropriate consultant to review and assist in the development of our compensation program. Mercer does not have any other significant business relationships with us other than the foreign engagements discussed below. The Companys 2008 expenditures with Mercer were approximately $1.6 million, of which approximately 20% was for work with the Committee and 80% was for the foreign engagement work discussed below. The Companys total expenditures with Mercer are not a significant portion of Mercers total revenue. When appropriate, the Committee has discussions with Mercer without management present to protect impartiality.
Due to our global reach and Mercers expertise, it may be in the Companys best interest to retain Mercer for limited services that are unrelated to their role as advisor to the Committee. Accordingly, engagements of Mercer are sometimes made by local management of certain of Motorolas non-U.S. subsidiaries. Management reports to the Committee regarding any fees for unrelated services and products purchased from Mercer. The most recent review took place in July 2008. At that time, the other work performed for the Company by Mercer involved: (1) pension consulting services in Ireland and the United Kingdom, and (2) the purchase of international compensation survey reports. Mercer has also performed the following international services: (1) medical insurance claims administration in Mexico, (2) group disability claims administration in Australia, and (3) consulting work in Ireland, Australia and New Zealand on benefits and/or reduction-in-force matters. The Committee reviews the services Mercer provides Motorola and other matters of judgment to ensure Mercers independence in advising the Committee.
In January 2009, the Committee engaged Mercer as it has in the past to independently review our executive rewards program and the compensation of our senior leadership team, including the Named Executive Officers. Mercers 2009 executive compensation review studied: (1) the relationship between our actual 2007 senior executive compensation levels and the Companys performance using available proxy data at that time, (2) the competitiveness of our target executive pay program in light of our executive compensation strategy, and (3) the competitiveness of our pay mix, long-term incentive compensation (LTI) mix, equity grants and LTI performance metrics compared to the market.
Mercer reviewed the following compensation components in its competitive assessment:
Mercer relied on both published survey sources, including the surveys listed above under Compensation Benchmarking, and peer company proxy data, including data from our comparator group, to determine our competitive positioning relative to the market.
Each position reviewed was matched to the market based on position, responsibility and the scope of the business for which the position was responsible.
Mercers study found that our compensation structure is highly leveraged so that strong Company performance leads to above-market pay and weak Company performance results in below-market pay. Mercer found that, overall, Motorolas business-based performance on select metrics was below the 25th percentile of our peers for 2007 and approximately at the 25th percentile for the three-year period from 2005 to 2007. The metrics were:
Mercer also found that 2007 base salaries and MIP Awards for our named executive officers in the 2008 Proxy Statement were at the 25th percentile of the competitive market. Our total compensation on a present value basis (2007 base salary plus 2007 actual bonus and 2008 LTI value), was above the 25th percentile of the peer group.
Mercers study found that:
Mercers study found that:
The Committee agreed with the Mercer studys conclusions and, as discussed below, relied on the studys findings in setting the 2009 compensation levels for our senior leadership team.