This excerpt taken from the PBG DEF 14A filed Mar 31, 2006.
Compensation Philosophy and Programs. The Committee operates under a philosophy that is focused on developing executive compensation and benefit programs that achieve the following goals:
The Committee implements this philosophy through executive compensation programs that drive both short-term and long-term Company performance and that provide key employees with fixed pay as well as variable, performance-based pay. We believe that our business leaders total compensation should be closely tied to the performance of the Company. Therefore, the percentage of total compensation that is performance-based increases in conjunction with the level of the executive. For the Chairman and CEO and the other Covered Executives, a substantial portion of their 2005 total target compensation was performance-based.
PBGs executive compensation programs include base salary (fixed, short-term pay), annual cash incentives (variable, short-term pay) and long-term incentives (variable, long-term pay), each as discussed below. Consistent with our philosophy, these programs were developed based on the following principles:
In designing and administering these programs each year, the Committee annually examines short-term, long-term and total compensation levels for the Companys executives against a peer group made up of at least 15 comparably sized companies from the consumer goods, bottling, retail and service industries. Peer group companies are generally world-class, industry leading companies with superior brands and/or products. Two of these companies (Coca-Cola Enterprises Inc. and PepsiAmericas, Inc.) are included in the Bottling Group Index described in the Performance Graph on page 24. The Committee believes that the peer group of companies reflects an appropriate labor market for the Companys executives and generally targets compensation within the third quartile (between the 50th and 75th percentile) of this peer group.