This excerpt taken from the SMG DEF 14A filed Dec 19, 2008.
Long-Term Equity-Based Incentive Awards (long-term compensation element)
The Compensation Committee targets the economic value (equity award value) of long-term equity-based incentive awards at the 50th percentile of the relevant compensation peer group. The target level is expressed as a multiple of base salary and may be delivered in any combination of options, stock appreciation rights
(SARs), restricted stock and/or performance shares. Consistent with the Companys performance-based pay philosophy, the targeted economic value of individual equity-based incentive awards may be adjusted upward or downward from the 50th percentile based on such factors as the overall performance level of the individual, years of service and the accumulated value of previous equity-based incentive awards.
For the 2008 fiscal year, the Company granted approximately 60% of the target equity award value in the form of non-qualified stock options (NSOs), with the remaining 40% granted in the form of restricted stock. The decision to use a combination of NSOs and restricted stock reflected competitive pay practices and allowed the Company to deliver the intended equity award value with fewer Common Shares underlying the awards granted. The specific numbers of Common Shares subject to NSOs and restricted stock awarded were determined as follows:
Target Option Award value / Black-Scholes value per option = number of Common Shares subject to NSOs awarded
Target Stock Award value / fair market value per share = number of Common Shares underlying Restricted Stock awarded
All NSOs and restricted stock awarded to the NEOs in the 2008 fiscal year were awarded subject to a three-year time-based cliff vesting provision. The restricted stock grants did not qualify as performance-based compensation for purposes of IRC § 162(m). As a result, the Companys ability to deduct the full value of these awards at the time of vesting may be limited. Information regarding our equity grant practices, including the determination of exercise price, can be found in the section captioned Other Executive Compensation Policies, Practices and Guidelines Practices Regarding Equity-Based Awards below.