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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
Table of Contents
(“SARs”), restricted stock
and/or
performance shares. Consistent with the Company’s
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 Company’s 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.
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