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NDAQ » Topics » General Compensation Philosophy

This excerpt taken from the NDAQ DEF 14A filed Apr 21, 2006.

General Compensation Philosophy

 

Nasdaq’s general continuing compensation philosophy is to provide a results based, total reward opportunity that firmly positions Nasdaq to attract, motivate and retain key executives and other key employees. Nasdaq works with external compensation consultants in order to ensure that we remain competitive with regard to compensation. Nasdaq approaches this objective through the following primary components:

 

  •   Base Salary – Base salaries for officers and staff are reviewed on an annual basis and at the time of promotion or other increase in responsibilities. External compensation survey data is used to compare levels of compensation for individuals holding comparable positions at targeted peer group companies. Individual performance and retention risk are also taken into consideration when reviewing base salaries.

 

  •  

Incentive Compensation – Two performance-based incentive plans are currently in place at Nasdaq. All executive officers participate in the ECIP and eligible staff employees participate in the Corporate Incentive Plan (CIP). For both plans, individual and corporate goals are determined during the first quarter of the plan year. Objective performance goals allow bonus payouts of up to 200% of the target bonus in the event the actual results exceed the targets established. For this purpose, floor, target and ceiling achievement levels are developed as follows: performance at or below the floor results in no payment, performance at target results in payment of 100% of target and performance at or above ceiling results in payment of 200% of the target. Achievement amounts between the floor and ceiling result in incremental changes in bonus payouts on a straight-line basis. Achievement levels are tracked on a monthly basis throughout the year and final results are reported to the Committee by the Finance Department. The performance goals utilized in 2005 for determining the payment of cash incentive bonuses under the ECIP and CIP were: (1) Operating Income (pre-tax run rate); (2) individual and business unit strategic measures; and (3) Employee Satisfaction Index (management staff only)

 

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determined by an annual business effectiveness survey. A more detailed discussion of these performance goals is presented in “Executive Compensation—Annual Cash Incentives” below. The Committee has approved sales incentive plans in order to appropriately compensate those employees who hold sales positions. Individuals participating in the ECIP and CIP are not eligible to participate in any sales incentive plans. All payments are subject to adjustment at the discretion of Nasdaq management and the Committee to ensure compliance with all applicable laws and high standards of regulatory and market integrity.

 

  •   Long-Term Incentives – Equity awards are designed to align the interests of officers and staff with those of shareholders by rewarding outstanding performance and providing incentives to increase long-term shareholder value. Periodic grants of long-term stock-based compensation, such as restricted stock or stock options are subject to performance-based and/or time-based vesting requirements. Nasdaq stock ownership is also made attractive for eligible employees through an Employee Stock Purchase Plan (ESPP). Under the ESPP, shares of common stock may be purchased at six-month intervals at 85% of the lower of the fair market value on the first or the last day of each offering period. Employees may purchase shares having a value not exceeding 10% of their annual compensation, subject to applicable annual Internal Revenue Service limitations. Participation in the ESPP is voluntary. Approximately 33% of eligible employees participated in the ESPP in 2005.

 

This excerpt taken from the NDAQ DEF 14A filed May 2, 2005.

General Compensation Philosophy

 

Nasdaq’s general compensation philosophy is to provide a results based, total reward opportunity that firmly positions Nasdaq to attract, motivate and retain key executives and other key employees. Nasdaq approaches this objective through these key components:

 

  •   Base Salary – Base salaries for officers and staff are reviewed on an annual basis and at the time of promotion or other increase in responsibilities. External compensation survey data is used as a comparison to individuals holding similar positions at targeted peer group companies. Individual performance and retention risk are also taken into consideration when reviewing base salaries.

 

  •   Incentive Compensation – Two performance-based incentive plans are currently in place at Nasdaq. Officers participate in the ECIP and eligible staff employees participate in the Corporate Incentive Plan (“CIP”). For both plans, individual and corporate goals are determined during the first quarter of the plan year. The Committee sets certain financial goals discussed in more detail below (including company-wide goals applicable to all participants and business line metrics specific to individual participants) that permit bonus payouts of up to 200% of the target bonus in the event the actual results exceed the targets established. For this purpose, floor, target and ceiling achievement levels are developed as follows: performance at or below the floor results in payment of 0%, performance at target results in payment of 100% of target and performance at or above ceiling results in payment of 200% of the target. Achievement amounts between the floor and ceiling result in incremental changes in bonus payouts on a straight-line basis. Non-financial goals are not eligible for bonus payments in excess of 100% of the target for that goal, unless the Committee approves payment in excess of the ceiling.

 

The performance goals utilized in 2004 for determining the payment of cash incentive bonuses under the ECIP and CIP were: (1) operating income; (2) individual business unit strategic measures; and (3) employee satisfaction index (management staff only) determined by an annual business effectiveness survey. A more detailed discussion of these performance goals is presented in “Executive Compensation—Annual Cash Incentives” below. In 2004, the Committee approved sales incentive plans

 

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in order to appropriately compensate those employees who hold sales positions. Individuals participating in the ECIP and CIP are not eligible to participate in any other corporate incentive program. All payments are subject to adjustment at the discretion of Nasdaq to ensure compliance with all applicable laws and high standards of regulatory and market integrity.

 

  •   Long-Term Incentives – Equity awards are designed to align the interests of officers and staff with those of shareholders by rewarding outstanding performance and providing long-term incentives. Periodic grants of long-term stock-based compensation, such as stock options may be subject to performance-based and/or time-based vesting requirements. Nasdaq stock ownership is also made attractive for eligible employees through a tax-qualified ESPP. Under the ESPP, shares of Nasdaq common stock may be purchased at six-month intervals (each, an “Offering Period”) at 85% of the lower of the fair market value on the first or the last day of each Offering Period. Employees may purchase shares having a value not exceeding 10% of their annual compensation, subject to applicable annual Internal Revenue Service limitations. Participation in the ESPP continues to be an important component of Nasdaq’s total compensation strategy and is voluntary. Approximately 18% of eligible employees participated in the ESPP in 2004.

 

  •   Performance Development – It is Nasdaq’s practice that each employee participates in the performance development process. Through a collaborative process, the manager and employee establish annual performance goals, which may be the same or similar to CIP goals. Goal achievement is documented through an annual performance review and performance development needs are identified and addressed through a development plan. Performance goals, reviews and development plans are administered through the Nasdaq Performance Development System, a web-based application accessible by all Nasdaq managers. Performance review results are the key factor in determining annual base salary merit increases for eligible employees.

 

EXCERPTS ON THIS PAGE:

DEF 14A
Apr 21, 2006
DEF 14A
May 2, 2005

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