This excerpt taken from the WDC DEF 14A filed Sep 24, 2007.
To assist the Compensation Committee in assessing the competitiveness of compensation levels and the appropriate mix of compensation elements to our executive officers, Mercer provides comparative market data on compensation practices and programs as well as guidance on industry best practices. In general, the market data is collected from independent published surveys for similarly-sized companies and from public filings of a group of peer companies in the high-technology industry.
The Compensation Committee, with guidance from Mercer, determines the composition of our peer group and reevaluates this group on an annual basis. For fiscal 2007, our peer group consisted of 19 U.S.-based technology companies of comparable size and performance to us. Most of the companies included in our peer group are also included in the Dow Jones U.S. Technology, Hardware and Equipment Index. Below is a list of the companies in our peer group in fiscal 2007:
On at least an annual basis, Mercer surveys market data as well as compensation data from our peer group companies and benchmarks the compensation paid to our executive officers. This benchmarking information is used by the Compensation Committee to help determine the level and appropriate mix of total annual cash compensation and long-term incentive compensation to our executive officers. Mercer also periodically advises the Compensation Committee on industry and best practices involving post-employment compensation as well as perquisites and other benefits to our executive officers.
As stated above, the Compensation Committee does not use a specific formula to set compensation for our executive officers. However, the intent of the Compensation Committee is to provide a total direct compensation opportunity for executive officers that is at or above median, but with an above-average amount of the total direct compensation opportunity at risk and dependent upon our performance. As a result, total annual cash compensation and the grant value of long-term incentive compensation, when combined, are generally targeted at or above the median of the total direct compensation levels for comparable jobs in the marketplace based on survey and peer group data. Individual executives may vary from this positioning based on their experience, expertise, importance of the role at our company relative to other companies, and potential for future performance, among other factors. In addition, depending upon the executives individual and business group performance as measured against financial and/or non-financial goals established by the Compensation Committee, amounts paid under our equity and non-equity incentive compensation programs may lead to total direct compensation levels that are lower or higher than the targeted total direct compensation levels for comparable jobs.
On a cumulative basis, the total direct compensation to our executive officers in fiscal 2007 was generally consistent with our intended pay strategy.