This excerpt taken from the NAVG DEF 14A filed Apr 27, 2006.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Boards Compensation Committee is charged, among other things, to make periodic reviews of the Companys compensation arrangements with executive officers and to make recommendations to the Board of Directors with respect to such arrangements. The Compensation Committees function is more fully described in its charter, which the Board has adopted and is available on our website at www.navg.com under the Corporate Governance link.
In 2004, the Compensation Committee engaged a nationally recognized executive compensation consultant to provide an extensive analysis of our employee compensation practices, with a particular emphasis on developing a more structured incentive compensation program. Based upon this extensive review, the Compensation Committee, in concert with management, developed a new annual incentive compensation plan which can be used for all employees (the Annual Incentive Program or AIP). The Annual Incentive Program divides employees into groups which are subject to performance indicators and objectives appropriate for that particular group, based upon responsibilities, skills, and other relevant factors. At the more senior level these objectives are largely related to the Companys overall performance, whereas at mid-level and lower levels, these objectives are more heavily weighted to business unit and individual performance. Furthermore, at the more senior levels, greater proportions of incentive compensation are paid in Common Stock, vesting over time, rather than in cash. We encourage our employees to own the Companys stock, and have their equity at risk, so as to focus them on the long term interests of Stockholders. As of December 31, 2005, 170 out of the Companys 275 employees directly own stock that was either granted to them by the Company or was purchased by them through the Companys Employee Stock Purchase Plan.
The principal objectives of the Companys compensation policies are to attract and retain qualified employees and to provide incentives and rewards for such employees to enhance the profitability and growth of the Company and thus lead to long-term enhancement of Stockholder value. The management compensation program currently consists of the following elements: annual payments of salary, the Executive Performance Incentive Plan (which provides for a bonus for designated individuals that will qualify for tax deductibility under section 162(m) of the Code), the Annual Incentive Program, and the 2005 Stock Incentive Plan (which provides for restricted stock grants and the grant of stock options and stock appreciation rights). The following describes components of the Companys management compensation program for the year ended December 31, 2005 and the related factors considered by the Compensation Committee in determining compensation.