Pepsi Bottling Group (PBG)

 

Consistent with the objectives of our program, we utilize the performance-based elements of our program to reinforce our short-term and long-term business objectives and to align shareholder and executive interests. We believe that to appropriately motivate our senior executives to achieve our business objectives, a majority of their compensation should be tied to the performance of the Company. Thus, we link the level of compensation to the achievement of our business objectives. As a result of this link, for years when the Company achieves above-target performance, executives will be paid above-target compensation, and for years when the Company achieves below-target performance, executives will be paid below-target compensation.

 

We also believe that the more influence an executive has over Company performance, the more the executive’s compensation should be tied to our performance results. Thus, the more senior the executive, the greater the percentage of his or her total compensation that is performance-based.

 

When looking at the three elements of total compensation, we view base salary as fixed pay (i.e., once established, it is not performance-based) and the annual incentive and long-term incentive as performance-based pay. With respect to our cash-based, annual incentive, our intent is to emphasize the Company’s performance in a given year. As a result of a design change approved by the Committee in 2008, we link eighty percent of the annual incentive to the achievement of annual performance measures (such as year-over-year profit and volume growth) and twenty percent of the incentive to the achievement of individual non-financial performance measures (such as employee and customer satisfaction survey scores). With respect to our equity-based, long-term incentive, we view the market value of PBG common stock as the primary performance measure. This is especially true in the case of stock options, which have no value to the executive unless the market value of PBG common stock goes up after the grant date. In the case of other equity-based awards to the Named Executive Officers, such as RSUs, that have value to the executive even if the market value of PBG common stock goes down after the grant date, we typically include a second performance component — such as a specific earnings per share performance target — that must be satisfied in order for the executive to vest in the award. In addition, we may grant supplemental, performance-based equity awards to executives in order to link long-term compensation with the Company’s strategic imperatives and to reinforce continuity within the senior leadership team, as we did with the 2008 Strategic Leadership Awards.

 

Consistent with the objectives of our program, we utilize the performance-based elements of our program to reinforce our short-term and long-term business objectives and to align shareholder and executive interests. We believe that to appropriately motivate our senior executives to achieve our business objectives, a majority of their compensation should be tied to the performance of the Company. Thus, we place great emphasis on performance-based compensation and we link the level of payment of that compensation to the achievement of our business objectives. As a result of this link, for years when the Company achieves above-target performance, executives will be paid above-target compensation, and for years when the Company achieves below-target performance, executives will be paid below-target compensation.

 

We also believe that the more influence an executive has over Company performance, the more the executive’s compensation should be tied to our performance results. Therefore, in setting the target compensation for our executives, we link the level of the executive and the percentage of his or her total compensation that is performance-based. Thus, the more senior the executive, the greater the percentage of his or her total compensation that is performance-based.

 

When looking at the three elements of total compensation, we view base salary as fixed pay (i.e., once established, it is not performance-based) and the annual incentive and long-term incentive as performance-based pay. With respect to our cash-based, annual incentive, our intent is to emphasize the Company’s performance in a given year. Thus, we link the amount of that incentive to the achievement during the year of key performance measures, such as year-over-year profit and volume growth. With respect to our equity-based, long-term incentive, we view the market value of PBG common stock as the primary performance measure. This is especially true in the case of stock options, which have no value to the executive unless the market value of PBG common stock goes up after the grant date. In the case of other equity-based awards to the Named Executive Officers, such as RSUs, that have value to the executive even if the market value of PBG common stock goes down after the grant date, we typically include a second performance component — such as a specific earnings per share performance target — that must be satisfied in order for the executive to vest in the award.