This excerpt taken from the PBG DEF 14A filed Apr 10, 2008.
What compensation actions were taken in 2007 and why were they taken?
In February 2007, the Committee took action with respect to each element of total compensation for each Named Executive Officer following the principles, practices and processes described above. The 2007 target and actual total compensation for each of the Named Executive Officers did not exceed the market target based on the data considered by the Committee in February 2007. Similarly each element of the Named Executive Officers target and actual total compensation did not exceed the market target, with the sole exception of Mr. Petrides base salary, as explained below.
Base Salary. In accordance with our practices with respect to individual raises, the level of merit increase in the base salary for each Named Executive Officer in 2007 took into consideration the performance of the Company and the executive, any increase in the executives responsibilities, and an analysis of whether the executives base salary was within the third quartile of PBGs peer group. The Committee determined that each Named Executive Officer had performed well with respect to his role and responsibilities and the average merit increase in the annual rate of base salary for the Named Executive Officers was 6.5%. The Committee approved a more substantial increase in Mr. Kings annual salary rate,
10.4%, in order to bring his compensation closer to the targeted third quartile following his 2006 promotion and in recognition of his increased responsibilities within the Company. Mr. Petrides, on the other hand, received a more modest increase since his base salary exceeded market target in part as a result of his time in position and the U.S. dollar/Euro exchange rate.
Annual Cash Incentive Award. The Committee established the 2007 annual incentive targets for our executives in February 2007. The Committee made no changes to the bonus target for the Named Executive Officers with the exception of Mr. Foss. The Committee determined that an increase in Mr. Foss annual incentive target, from 130% to 140% of base pay, was appropriate in light of his position and responsibilities as President and CEO and as measured against the targeted third quartile of total compensation of CEOs within the peer group.
Actual Awards. In January 2008, the Committee determined that the Companys EPS performance in 2007 in excess of $1.75 resulted in a maximum bonus of $5 million payable to each Named Executive Officer under Section 162(m). The Committee then reviewed the Companys 2007 performance against the pre-established EPS/NOPBT, volume and operating free cash flow targets, which the Committee uses to guide its negative discretion in determining the actual bonus payable to each senior executive. With respect to the CEO, the Committee also considered certain pre-established qualitative factors including organizational capability, strategic long-term growth and a strengthened senior leadership team.
The Committee concluded that the Company had performed significantly above target with respect to worldwide performance against two of the three criteria applicable to the bonuses payable to Messrs. Foss, Drewes, King and Rapp. Specifically, the Committee concluded that EPS and cash flow results exceeded expectations. With respect to the bonus payable to Mr. Petrides, the Committee concluded that the Company had performed above target with respect to performance in Europe overall with three of the four countries in the segment performing well above target.
The Committee also determined that Mr. Foss had performed well against the pre-established qualitative factors. In particular, the Committee noted that Mr. Foss made significant progress on the employee diversity front, with CEO commitment cited by Diversity Inc. as the primary driver of PBGs No. 2 ranking within its top 50 companies for diversity. The Committee also noted that Mr. Foss successfully developed a comprehensive growth strategy in the United States, centering on hydration, and that he added depth and strength to the senior leadership team.
For 2007, the annual incentive targets and actual payout amounts for each of the Named Executive Officers were as follows:
The Committee believed these percentages reflected the Companys 2007 performance and were consistent with its policy to link pay to performance. For additional information regarding the 2007 annual incentive awards, see pages 39-41.
Long-Term Incentive. Consistent with its established practice, the Committee approved the 2007 long-term incentive awards for each of our Named Executive Officers after reviewing comparative market data for total compensation, including data related to what portion of total compensation was paid in the form of long-term incentive. The Committee also considered each executives role and level of responsibility within the Company. Mr. Foss was awarded a long-term equity incentive award with a present value of approximately $4,000,000. Messrs. King, Drewes and Petrides received a long-term equity incentive
award with a present value of approximately $1,000,000 and Mr. Rapp was granted a long-term equity incentive award with a present value of approximately $800,000.
The 2007 stock option and RSU awards to our Named Executive Officers are reflected in the Grants of Plan-Based Awards Table. These awards included the same terms and conditions as the awards to all other executives, except that consistent with its practice, the Committee made the vesting of the RSU award granted to our Named Executive Officers subject to the achievement of a 2007 EPS performance target. In January 2008, the Committee determined that the 2007 EPS target had been satisfied, such that each Named Executive Officer will vest in his 2007 RSU award if he remains employed by the Company through March 1, 2010. The terms and conditions of the long-term incentive awards, as well as the RSU 2007 EPS target, are set out in the Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table.