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This excerpt taken from the SMG DEF 14A filed Dec 19, 2008. Other
Executive Compensation Policies, Practices and
Guidelines
Practices
Regarding Equity-Based Awards
In general, all employees are eligible to receive grants of
equity-based awards; however, the Compensation Committee
typically limits participation to the CEO, the NEOs and other
key management employees. The decision to include certain key
management employees in the annual equity-based awards is
reflective of competitive market practice and serves to reward
those individuals for their past and future positive impact on
our business results.
Grants of option awards
and/or stock
awards are typically approved on an annual basis at a regularly
scheduled meeting of the Compensation Committee. The grant date
is established as the date of the Compensation Committee action.
In certain instances, an equity-based award may be granted to a
new hire as of the later of the date such grant is approved by
the Compensation Committee or the date employment commences. The
Company does not have any program, plan or practice to time
annual equity-based awards to our executives in coordination
with the release of material non-public information.
The exercise price for each NSO is equal to the closing price of
the Common Shares on the grant date, as reported on NYSE. If the
grant date is not a trading day on NYSE, the exercise price is
equal to the closing price on the next succeeding trading day.
Stock
Ownership Guidelines
The Compensation Committee has established stock ownership
guidelines, which vary by position, for the CEO and the NEOs.
The purpose of these guidelines is to align the interests of
each NEO with the long-term interests of the shareholders by
ensuring that a material amount of each NEO’s accumulated
wealth is maintained in the form of Common Shares. The minimum
target levels of stock ownership established by position are as
follows:
The Compensation Committee believes that these stock ownership
guidelines are generally more stringent than the competitive pay
practices of our compensation peer groups since we include the
annual target EMIP opportunity (in addition to base salary) when
establishing the minimum amount of stock ownership desired,
while most of the other members of our compensation peer groups
look only at multiples of base salary. For purposes of achieving
the desired level of stock ownership, the following forms of
equity-based holdings are included:
Table of Contents
According to the Company’s stock ownership guidelines, each
NEO has five years from the date of hire or promotion to fully
reach the appropriate ownership guideline for his or her
position.
Recoupment/Clawback
Policies
To protect the interests of the Company and its shareholders,
subject to applicable law, all equity-based awards and all
amounts paid under the EMIP and the SIP contain recoupment
provisions (known as clawback provisions) designed to enable the
Company to recoup Common Shares or other amounts earned or
received under the terms of an equity-based award, the EMIP or
the SIP based on subsequent events, such as violation of
non-compete covenants or engaging in conduct that is deemed to
be detrimental to the Company (as outlined in the underlying
plan and/or
award agreement).
Guidelines
with Respect to Tax Deductibility and Accounting
Treatment
The Company’s ability to deduct certain elements of
compensation paid to each of the NEOs is generally limited to
$1 million annually, under IRC § 162(m). This
non-deductibility is generally limited to amounts that do not
meet certain technical requirements to be classified as
“performance-based” compensation. To ensure the
maximum tax deduction allowable, the Company attempts to
structure its cash-based incentive programs to qualify as
performance-based compensation under IRC § 162(m). For
the 2008 fiscal year, none of the NEOs, other than the CEO, had
non-performance-based compensation in excess of $1 million.
The Company accounts for stock-based compensation, including
option awards and stock awards, in accordance with
SFAS 123(R). Prior to making decisions to grant
equity-based awards, the Compensation Committee reviews pro
forma expense estimates, as well as an analysis of the potential
dilutive effect such awards could have on existing shareholders.
Where appropriate, the proposed level of the equity-based awards
may be adjusted to balance these objectives.
Decisions regarding the design, structure and operation of the
Company’s incentive plans, including the EMIP, the SIP and
the equity-based incentive plans, contemplate an appropriate
balance between the underlying objectives of each plan and the
resulting accounting and tax implications to the Company. While
we view preserving the tax deductibility of executive
compensation as an important objective, there are instances
where the Compensation Committee has approved design elements
that may not be fully tax-deductible, but are accepted as
trade-offs that support the achievement of other compensation
objectives. For example, based on the desire to add a level of
individual accountability to the team oriented measurements in
the EMIP, a 25% discretionary element was included in the design
for the 2008 fiscal year, even though the use of such discretion
had the potential to limit the Company’s tax deduction with
respect to such payment.
Due to the timing of the establishment of the SIP within the
2008 fiscal year, the payouts made under the SIP did not qualify
as performance-based compensation for purposes of IRC
§ 162(m). However, when it established the SIP in May
2008, the Compensation Committee concluded that the best
interests of the Company and its stakeholders would be served by
ensuring that meaningful incentives were maintained for eligible
employees to deliver financial results within the revised range
of the Company’s guidance, as described in the
Company’s May 5, 2008 earnings release.
For the 2008 fiscal year, the Company granted approximately 60%
of the target equity award value in the form of NSOs, with the
remaining 40% granted in the form of restricted stock. While the
restricted stock does not qualify as performance-based
compensation for purposes of IRC § 162(m), 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 and to balance the overall market
risk associated with the equity-based compensation for each NEO.
This excerpt taken from the SMG DEF 14A filed Dec 20, 2007. Other
Executive Compensation Policies, Practices and
Guidelines
Practices Regarding Equity-Based
Awards: In general, all employees are
eligible to receive grants of equity-based awards; however, the
Compensation and Organization Committee typically limits
participation to the CEO, the executive officers and other key
management employees. The decision to include certain key
management employees in the annual equity-based awards is
reflective of competitive market practice and serves to reward
those individuals for their past and future impact on our
business results.
Grants of Option Awards
and/or Stock
Awards are typically approved on an annual basis at a regularly
scheduled meeting of the Compensation and Organization
Committee. The grant date is established as the date of the
Compensation and Organization Committee action. In certain
instances, an equity-based award may be granted to a new hire as
of the later of the date such grant is approved by the
Compensation and Organization Committee, or the date employment
commences. The Company does not have any program, plan or
practice to time annual equity-based awards to our executives in
coordination with the release of material non-public information.
The exercise price for each NSO is equal to the closing price of
the Company’s common shares on the grant date, as reported
on NYSE. If the grant date is not a trading day on NYSE, the
exercise price is established as the closing price on the
succeeding trading day. The Company does not have any program,
plan or practice of determining the exercise price of an NSO on
any date other than the grant date.
Stock Ownership Retention
Guidelines: The Compensation and Organization
Committee has established stock ownership retention guidelines,
which vary by position, for the CEO and the NEOs. The purpose of
these guidelines is to align the interests of each NEO with the
long-term interests of the shareholders by ensuring that a
material amount of each executive’s accumulated wealth is
maintained in the form of common shares of the Company. The
minimum target levels of equity ownership (retention)
established by position are as follows:
The Compensation and Organization Committee believes that these
retention guidelines are generally more stringent than the
competitive pay practices of our compensation peer group since
we include the annual
target EMIP amount (in addition to base salary) when
establishing the minimum amount of stock ownership desired,
while most of the other members of our peer group look only at
multiples of base salary. For purposes of achieving the desired
level of stock ownership retention, the Company considers the
following forms of equity-based holdings:
According to the Company’s stock ownership retention
guidelines, each NEO has five years from the date of hire or
promotion to fully reach the appropriate retention guideline for
his or her position.
Recoupment/Clawback
Policies: To protect the interests of the
Company and its shareholders, all equity-based awards are
subject to recoupment provisions (known as clawback provisions).
These provisions are designed to enable the Company to recoup
common shares or other amounts earned or received under the
terms of an equity-based award based on subsequent events, such
as violation of non-compete covenants or engaging in conduct
that is deemed to be detrimental to the Company (as outlined in
the underlying plan
and/or award
agreement).
In addition to the clawback provisions for equity-based awards,
all amounts paid under the EMIP are subject to similar
recoupment provisions.
The Company’s ability to deduct certain elements of
compensation paid to each of the NEOs is generally limited to
$1 million annually, under Internal Revenue Code
Section 162(m). This non-deductibility is generally limited
to amounts that do not meet certain technical requirements to be
classified as “performance-based” compensation. To
ensure the maximum tax deduction allowable, the Company attempts
to structure its cash-based incentive programs to qualify as
performance-based compensation under Internal Revenue Code
Section 162(m).
The Company accounts for stock-based compensation, including
Option Awards and Stock Awards, in accordance with
SFAS 123(R). Prior to making decisions to grant
equity-based awards, the Compensation and Organization Committee
reviews pro forma expense estimates, as well as an analysis of
the potential dilutive effect such awards could have on existing
shareholders. Where deemed appropriate, the proposed level of
the equity-based awards may be adjusted to balance these
objectives.
Decisions regarding the design, structure and operation of the
Company’s incentive plans, including the EMIP and the
equity-based incentive plans, contemplate an appropriate balance
between the underlying objectives of each plan and the resulting
accounting and tax implications to the Company. While we view
preserving the tax deductibility as an important objective,
there are instances where the Compensation and Organization
Committee has approved design elements that may not be fully
tax-deductible, but are accepted as trade-offs that support the
achievement of other corporate objectives. For example, based on
the desire to add a level of individual accountability to the
team oriented measurements in the EMIP, a 25% discretionary
element was added to the design for the 2007 fiscal year. The
Company has made a trade-off between the potential tax due to
non-deductibility and the desire to achieve higher level
corporate objectives such as individual accountability.
The Compensation and Organization Committee has reviewed and
discussed the Compensation Discussion and Analysis required by
Item 402(b) of SEC
Regulation S-K
with management and, based on such review and discussions, the
Compensation and Organization Committee recommended to the Board
of Directors (and the Board of Directors approved) that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
Submitted
by the Compensation and Organization Committee of the Board of
Directors of the Company:
Arnold W. Donald, Chair
Mark R. Baker Joseph P. Flannery
At the end of the 2007 fiscal year, the Company had only four
executive officers that were still actively serving in that
capacity. Accordingly, the NEOs for purposes of this disclosure
include James Hagedorn, who served as Principal Executive
Officer throughout the 2007 fiscal year, David C. Evans, who
served as Principal Financial Officer throughout the 2007 fiscal
year, Barry W. Sanders and Denise S. Stump, who were the only
other executive officers serving at the end of the 2007 fiscal
year. Each of Mr. Hagedorn, Mr. Evans,
Mr. Sanders and Ms. Stump serves pursuant to an
employment agreement as described below under the caption
“PAYMENTS ON TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL — Employment Agreements and Termination of
Employment and
Change-in-Control
Arrangements.” In addition, two former executive officers
are disclosed as NEOs, Christopher L. Nagel and David M.
Aronowitz, who would have been among the most highly compensated
executive officers, but were not serving as executive officers
at the end of the 2007 fiscal year. Mr. Nagel served as
Executive Vice President, North America Consumer Business
through July 18, 2007 and Mr. Aronowitz served as
Executive Vice President, General Counsel and Corporate
Secretary through July 17, 2007.
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