This excerpt taken from the PBG DEF 14A filed Mar 31, 2006.
Annual Cash Incentives. Executive officers are eligible to receive annual, performance-based cash incentives under the PBG 2005 Executive Incentive Compensation Plan (EICP), which was approved by shareholders in 2005. Shareholder approval of the EICP is required under Section 162(m) of the Internal Revenue Code in order to ensure that the Company may recognize a tax deduction with respect to the awards paid under the EICP.
The EICPs objectives are to support the attainment of PBGs business and performance goals by placing a substantial percentage of each executive officers short-term pay at risk. In January 2005, in order to ensure deductibility of the awards under Section 162(m) of the Code, the Committee established a specific performance goal that had to be satisfied in order for any incentive award to be paid to a Covered Executive. The pre-established performance goal was based 100% on earnings per share (EPS) performance, and a specific maximum annual incentive award was established with respect to various EPS results. No payment was permitted to the Covered Executives if the minimum EPS goal was not met. The Committee also resolved to review performance against other quantitative and qualitative goals and, if appropriate, to utilize its negative discretion to determine the actual incentive paid to a Covered Executive in the event the minimum EPS goal was met. In all cases where the Committee utilizes such discretion, the actual incentive paid is less than the maximum amount permitted based on the level of EPS achieved.
In February 2006, the Committee certified that the minimum EPS goal for 2005 was achieved and that each Covered Executive was eligible to receive the maximum annual incentive relative to the actual EPS result. The Committee then exercised its negative discretion to decrease the amount payable to each Covered Executive. In exercising this discretion with respect to the final awards, the Committee considered other quantitative factors, including volume, profit, and cash flow, as well as other qualitative factors. The award paid to each Covered Executive is indicated in the Bonus column of the Summary Compensation Table on page 11.