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This excerpt taken from the WBMD DEF 14A filed Aug 14, 2007. Use of
Specific Types of Compensation in 2006.
Base Salary. The Compensation Committee
reviews the base salaries of our executive officers from time to
time, but expects to make few changes in those salaries except
upon a change in position. No such changes were made in 2006. In
general, it is the Committee’s view that increases in the
cash compensation of our executive officers should be
performance-based and achieved through the bonus-setting
process, rather than through an increase in base salary.
However, when the Compensation Committee contemplates an
adjustment to base salary, various factors are considered,
including: company performance, the executive’s individual
performance, scope of responsibility and changes in that scope
(including as a result of promotions), tenure, prior experience
and market practice. Similar factors are considered by WebMD
senior management in determining whether to make adjustments to
salaries of other employees, and such changes are made more
frequently.
Annual Cash Bonuses. WebMD executives have the
opportunity to earn annual cash bonuses. For executives who are
not executive officers, individual target opportunities, as a
percentage of their base salary, are generally established by
our Chief Executive Officer and other members of senior
management. These target percentages vary based on each
executive’s level and scope of responsibility. Actual bonus
amounts are determined considering an executive’s personal
performance and the performance of WebMD during the year (which
includes, in the case of executives working in specific business
segments, the performance of that segment during the year). In
addition, we adopted a supplemental bonus plan for certain
designated high performing employees in 2006 who are not
executive officers. These bonuses were communicated in March
2007 and will be paid so long as the plan participant remains
employed by us through March 1, 2008; provided, however,
that a participant will be entitled to receive his or her bonus
under the plan if his or her employment terminates prior to
March 1, 2008 as a result of a reduction in force or job
elimination or as a result of death or disability. We prefunded
the aggregate bonus amount into a trust and the earnings and
forfeitures will be paid out to participants from that trust on
a pro rata basis, after payment of plan expenses.
Table of Contents
With respect to WebMD’s executive officers, the amounts of
their 2006 annual bonuses were determined by the Compensation
Committee (or, in the case of Mr. Wygod, by the HLTH
Compensation Committee) in its discretion, based upon its
assessment of individual and company performance during the
year. In some years, bonus awards for some of our executive
officers (particularly newly hired executive officers) may be
dictated by the terms of the executive’s employment
agreement, providing for payment of a specified bonus amount or
an amount within a specific range with respect to a specific
employment period. No such requirements applied with respect to
2006. In addition, no pre-established performance targets were
used in determining bonus amounts for executive officers for
2006; the Compensation Committee determined such amounts based
on its assessment of the performance of WebMD in 2006 (taking
into consideration the extent to which financial and operational
goals discussed by management and the Board during 2006 were
achieved and the reasons for that) and its assessment of each
executive officer’s individual performance and
contributions during the year.
The following table lists the annual cash bonuses payable to the
Named Executive Officers with respect to 2006, as well as with
respect to 2005:
Mr. Wygod’s annual cash bonus was approved by the
Compensation Committee of HLTH and paid by HLTH.
Special Bonuses. No special bonuses were paid
by WebMD to the Named Executive Officers in 2006. However,
Mr. Wygod received a special bonus from HLTH of $2,750,000
in 2006 in recognition of the completion of the sale
transactions involving Emdeon Practice Services and Emdeon
Business Services and the related repositioning of HLTH. In
addition, Mr. Vuolo, our Chief Financial Officer, received
a special bonus of $450,000 from HLTH in 2006 primarily in
recognition of his services to HLTH in connection with those
transactions.
Equity Compensation. We use two types of
long-term incentives: non-qualified stock options and restricted
stock. Stock options are granted with an exercise price that is
equal to the fair market value of WebMD Class A Common
Stock on the grant date. Thus, the Named Executive Officers will
only realize value on their stock options if the price of WebMD
Class A Common Stock increases after the grant date. The
Compensation Committee believes that equity compensation,
subject to vesting periods of three to four years, encourages
employees to focus on the long-term performance of our company.
The amount that employees receive from equity awards increases
when the price of Class A WebMD Common Stock increases,
which rewards employees for increasing shareholder value. The
vesting schedules applicable to these equity awards are intended
to promote retention of employees during the vesting period.
Because our Named Executive Officers received significant equity
grants in connection with our initial public offering in
September 2005, the Compensation Committee did not make any
equity grants to our executive officers (including the Named
Executive Officers) in 2006. A total of 4,195,700 options to
purchase WebMD Class A Common Stock were granted to our
employees at the time of our initial public offering, all with
an exercise price equal to the initial public offering price of
$17.50. The total number of shares of WebMD Restricted Stock
awarded in connection with the initial public offering was
374,900. These equity awards are all scheduled to vest over a
4 year period, with 25% of each award vesting on each
anniversary date of the date of grant for the 4 year
vesting period.
In determining whether and when to make future equity grants to
our executive officers, the Compensation Committee expects that
it will consider the history of prior grants made to individual
Named Executive
Table of Contents
Officers, their vesting status and the amounts that have been or
may be realized by those individuals from those grants
(including HLTH equity grants, if any). In addition, the
Compensation Committee expects that it will consider factors
similar to those it considers in its decisions relating to cash
compensation, as described above, including factors relating to
individual and company performance.
Benefits and Perquisites. Our executive
officers are generally eligible to participate in HLTH’s
benefit plans on the same basis as our other employees
(including matching contributions to a 401(k) Plan and
company-paid group term life insurance). HLTH, for the past
several years, has maintained a sliding scale for the cost of
employee premiums for its health plan, under which employees
with higher salaries pay a higher amount. The limited
perquisites (or “perks”) received by our Named
Executive Officers in 2006 are described in the footnotes to the
Summary Compensation Table and consisted primarily of car
allowances. In addition, our executive officers (as part of a
larger group of employees generally having a salary of $180,000
or more) receive company-paid supplemental disability insurance,
the cost of which is listed in those footnotes.
Deductibility of
Compensation. Section 162(m) of the
Internal Revenue Code generally limits the ability of a publicly
held corporation to deduct compensation in excess of
$1 million per year paid to certain executive officers. It
is the policy of the Compensation Committee to structure, where
practicable, compensation paid to its executive officers so that
it will be deductible under Section 162(m) of the Code.
Accordingly, WebMD’s equity plans under which awards are
made to officers and directors are generally designed to ensure
that compensation attributable to stock options granted will be
tax deductible by WebMD. However, cash bonuses for WebMD’s
executive officers and grants of restricted stock do not qualify
as performance-based within the meaning of Section 162(m)
and, therefore, are subject to its limits on deductibility. In
determining that the compensation of WebMD’s executive
officers for 2006 was appropriate under the circumstances and in
the best interests of WebMD and its stockholders, the
Compensation Committee considered the amount of net operating
loss carryforwards available to WebMD to offset income for
Federal income tax purposes. See Note 14 to the
Consolidated Financial Statements included in our Annual Report
on
Form 10-K
for the year ended December 31, 2006.
This excerpt taken from the WBMD 10-K filed Apr 30, 2007. Use of
Specific Types of Compensation in 2006.
Base Salary. The Compensation Committee
reviews the base salaries of our executive officers from time to
time, but expects to make few changes in those salaries except
upon a change in position. No such changes were made in 2006. In
general, it is the Committee’s view that increases in the
cash compensation of our executive officers should be
performance-based and achieved through the bonus-setting
process, rather than through an increase in base salary.
However, when the Compensation Committee contemplates an
adjustment to base salary, various factors are considered,
including: company performance, the executive’s individual
performance, scope of responsibility and changes in that scope
(including as a result of promotions), tenure, prior experience
and market practice. Similar factors are considered by WebMD
senior management in determining whether to make adjustments to
salaries of other employees, and such changes are made more
frequently.
Annual Cash Bonuses. WebMD executives have the
opportunity to earn annual cash bonuses. For executives who are
not executive officers, individual target opportunities, as a
percentage of their base salary, are generally established by
our Chief Executive Officer and other members of senior
management. These target percentages vary based on each
executive’s level and scope of responsibility. Actual bonus
amounts are determined considering an executive’s personal
performance and the performance of WebMD during the year (which
includes, in the case of executives working in specific business
segments, the performance of that segment during the year). In
addition, we adopted a supplemental bonus plan for certain
designated high performing employees in 2006 who are not
executive officers. These bonuses were communicated in March
2007 and will be paid so long as the plan participant remains
employed by us through March 1, 2008; provided, however,
that a participant will be entitled to receive his or her bonus
under the plan if his or her employment terminates prior to
March 1, 2008 as a result of a reduction in force or job
elimination or as a result of death or disability. We prefunded
the aggregate bonus amount into a trust and the earnings and
forfeitures will be paid out to participants from that trust on
a pro rata basis, after payment of plan expenses.
With respect to WebMD’s executive officers, the amounts of
their 2006 annual bonuses were determined by the Compensation
Committee (or, in the case of Mr. Wygod, by the Emdeon
Compensation Committee) in its discretion, based upon its
assessment of individual and company performance during the
year. In some years, bonus awards for some of our executive
officers (particularly newly hired executive officers) may be
dictated by the terms of the executive’s employment
agreement, providing for payment of a specified bonus amount or
an amount within a specific range with respect to a specific
employment period. No such requirements applied with respect to
2006. In addition, no pre-established performance targets were
used in determining bonus amounts for executive officers for
2006; the Compensation Committee determined such amounts based
on its assessment of the performance of WebMD in 2006 (taking
into consideration the extent
Table of Contents
to which financial and operational goals discussed by management
and the Board during 2006 were achieved and the reasons for
that) and its assessment of each executive officer’s
individual performance and contributions during the year.
The following table lists the annual cash bonuses payable to the
Named Executive Officers with respect to 2006, as well as with
respect to 2005:
Mr. Wygod’s annual cash bonus was approved by the
Compensation Committee of Emdeon and paid by Emdeon.
Special Bonuses. No special bonuses were paid
by WebMD to the Named Executive Officers in 2006. However,
Mr. Wygod received a special bonus from Emdeon of
$2,750,000 in 2006 in recognition of the completion of the sale
transactions involving Emdeon Practice Services and Emdeon
Business Services and the related repositioning of Emdeon. In
addition, Mr. Vuolo, our Chief Financial Officer, received
a special bonus of $450,000 from Emdeon in 2006 primarily in
recognition of his services to Emdeon in connection with those
transactions.
Equity Compensation. We use two types of
long-term incentives: non-qualified stock options and restricted
stock. Stock options are granted with an exercise price that is
equal to the fair market value of WebMD Class A Common
Stock on the grant date. Thus, the Named Executive Officers will
only realize value on their stock options if the price of WebMD
Class A Common Stock increases after the grant date. The
Compensation Committee believes that equity compensation,
subject to vesting periods of three to four years, encourages
employees to focus on the long-term performance of our company.
The amount that employees receive from equity awards increases
when the price of Class A WebMD Common Stock increases,
which rewards employees for increasing shareholder value. The
vesting schedules applicable to these equity awards are intended
to promote retention of employees during the vesting period.
Because our Named Executive Officers received significant equity
grants in connection with our initial public offering in
September 2005, the Compensation Committee did not make any
equity grants to our executive officers (including the Named
Executive Officers) in 2006. A total of 4,195,700 options to
purchase WebMD Class A Common Stock were granted to our
employees at the time of our initial public offering, all with
an exercise price equal to the initial public offering price of
$17.50. The total number of shares of WebMD Restricted Stock
awarded in connection with the initial public offering was
374,900. These equity awards are all scheduled to vest over a
4 year period, with 25% of each award vesting on each
anniversary date of the date of grant for the 4 year
vesting period.
In determining whether and when to make future equity grants to
our executive officers, the Compensation Committee expects that
it will consider the history of prior grants made to individual
Named Executive Officers, their vesting status and the amounts
that have been or may be realized by those individuals from
those grants (including Emdeon equity grants, if any). In
addition, the Compensation Committee expects that it will
consider factors similar to those it considers in its decisions
relating to cash compensation, as described above, including
factors relating to individual and company performance.
Benefits and Perquisites. Our executive
officers are generally eligible to participate in Emdeon’s
benefit plans on the same basis as our other employees
(including matching contributions to a 401(k) Plan and
company-paid group term life insurance). Emdeon, for the past
several years, has maintained a sliding scale for the cost of
employee premiums for its health plan, under which employees
with higher salaries pay a
Table of Contents
higher amount. The limited perquisites (or “perks”)
received by our Named Executive Officers in 2006 are described
in the footnotes to the Summary Compensation Table and consisted
primarily of car allowances. In addition, our executive officers
(as part of a larger group of employees generally having a
salary of $180,000 or more) receive company-paid supplemental
disability insurance, the cost of which is listed in those
footnotes.
Deductibility of
Compensation. Section 162(m) of the
Internal Revenue Code generally limits the ability of a publicly
held corporation to deduct compensation in excess of
$1 million per year paid to certain executive officers. It
is the policy of the Compensation Committee to structure, where
practicable, compensation paid to its executive officers so that
it will be deductible under Section 162(m) of the Code.
Accordingly, WebMD’s equity plans under which awards are
made to officers and directors are generally designed to ensure
that compensation attributable to stock options granted will be
tax deductible by WebMD. However, cash bonuses for WebMD’s
executive officers and grants of restricted stock do not qualify
as performance-based within the meaning of Section 162(m)
and, therefore, are subject to its limits on deductibility. In
determining that the compensation of WebMD’s executive
officers for 2006 was appropriate under the circumstances and in
the best interests of WebMD and its stockholders, the
Compensation Committee considered the amount of net operating
loss carryforwards available to WebMD to offset income for
Federal income tax purposes. See Note 14 to the
Consolidated Financial Statements included in this Annual Report.
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