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This excerpt taken from the SMG DEF 14A filed Dec 20, 2007. Long-Term
Equity-Based Incentive Plans (long-term compensation
element)
The Compensation and Organization Committee targets the economic
value (equity award value) for long-term equity-based incentive
awards at the
50th percentile
of the compensation peer group. The target level is expressed as
a multiple of the base salary and may be delivered in any
combination of options, stock appreciation rights
(“SARs”), restricted stock
and/or
performance shares. Consistent with the Company’s
performance-based pay philosophy, the targeted economic value of
individual equity grants 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 2007 fiscal year, the Company granted approximately 50%
of the desired equity award value in the form of NSOs, with the
remaining 50% granted in the form of restricted stock. The
decision to use a combination of NSOs and restricted stock
reflects competitive pay practices and allows the Company to
deliver the intended equity award value with fewer common
shares. The specific numbers of common shares subject to NSOs
and restricted stock awarded were determined as follows:
Desired Option Award value / Black-Scholes value per option =
# of common shares subject to NSOs awarded
Desired Stock Award value / FMV per share = # of common
shares underlying Restricted Stock awarded
All NSOs and restricted stock awarded to the NEOs in the 2007
fiscal year are subject to a three-year time-based cliff vesting
provision. The restricted stock grants do not qualify as
performance-based compensation for purposes of Internal Revenue
Code Section 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 on our equity grant
practices and the determination of exercise price are explained
under the section captioned “Other Executive Compensation
Policies, Practices and Guidelines — Practices
Regarding Equity-Based Awards” below.
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