This excerpt taken from the SMG DEF 14A filed Dec 20, 2007.
Setting Compensation Levels for Other NEOs
The Compensation and Organization Committee intends to deliver an appropriate level of total compensation to each of the NEOs by evaluating and balancing the following objectives:
Consistent with our performance-oriented pay philosophy, the compensation structure for the NEOs, other than the CEO, is allocated to deliver about one-third of the annual compensation opportunity in the form of fixed pay (i.e. base salary) and the remaining two-thirds in the form of variable pay (short-term and long-term incentives). This pay mix is generally in line with the pay mix of our 2007 fiscal year compensation peer group.
Based on their assessment of the individual performance of each NEO, the CEO and the Executive Vice President, Global Human Resources, submit compensation recommendations to the Compensation and Organization Committee for each NEO. These recommendations incorporate all elements of compensation, including base salary, annual incentive compensation, equity-based compensation and perquisites. To evaluate the compensation recommendations, the Compensation and Organization Committee considers information such as the Companys financial performance as well as the compensation of similarly situated executives as determined by reference to the benchmark data for our 2007 fiscal year compensation peer group.
In general, the total direct compensation level, at target levels of performance, for most of the NEOs, other than the CEO, was between the 50th and 65th percentile compared to the 2007 fiscal year compensation peer group. The total direct compensation level for Mr. Sanders and for Mr. Nagel, the former head of the Companys North America Consumer Business, were below the 50th percentile. The Compensation and Organization Committee believes that the total direct compensation for each of these individuals was appropriate in view of the objectives noted above and that variances from the target range versus the 2007 fiscal year compensation peer group were the result of the fact that such individuals were in their then current positions a relatively short period of time.
For the 2007 fiscal year, 100% of the target incentive compensation opportunity under the EMIP for the NEOs, other than the CEO, was directly attributable to attainment of annual performance measures as follows:
A description of the specific performance goals and the payout levels associated with each performance measure are discussed later in this CD&A and in the narrative accompanying the Summary Compensation Table beginning on page 32 and the narrative accompanying the Grants of Plan-Based Awards Table beginning on page 38.
For the 2007 fiscal year, approximately 50% of the economic value of the long-term equity-based compensation granted to the NEOs, other than the CEO, was in the form of NSOs and the remaining 50% was granted in the form of restricted stock. Both the NSOs and the restricted stock are subject to three-year, time-based cliff vesting. The Compensation and Organization Committees decision to award a mix of NSOs and
restricted stock reflects a balance between rewarding the NEOs for future share price appreciation while attempting to mitigate the dilution to existing shareholders since a grant of restricted stock requires considerably fewer common shares than a grant of NSOs while delivering the same economic value, measured as of the time of grant.