This excerpt taken from the SMG DEF 14A filed Dec 20, 2006.
Objectives of the Executive Compensation Program
The Compensation and Organization Committees primary responsibility is the establishment of compensation programs for the Companys executive officers who are in a position to maximize long-term shareholder value. The executive compensation program is designed with a performance orientation, with a large portion of executive compensation being at risk. In pursuing this objective, the Committee believes that the Companys executive compensation program should:
The Committee sets target compensation levels that are designed to be competitive with a comparison group of consumer products companies of similar size and complexity (the Comparison Group). These data may not include all of the companies that are included in the S&P 500 Household Index, which is used for comparative purposes in the performance graph that appears on page 38. Target total compensation levels are aimed at providing market median pay levels when our performance meets our challenging goals. We have the ability and the flexibility to move to the 75th percentile for world-class talent and top performance when appropriate. Conversely, target pay levels may be set below market median for individuals new to positions or for whom improved performance is necessary to meet our standards. The executive group as a whole will receive below market compensation when our financial performance fails to meet our standards or our stock performance lags the market.
The Companys cash incentive compensation programs are designed to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. In addition, the design and administration
of the 1996 Plan, the 2003 Plan, and the 2006 Plan are intended to qualify any equity-based compensation attributable to participation thereunder as performance-based compensation. The Committee continues to carefully consider the net cost and value to the shareholders of the Companys compensation practices.