This excerpt taken from the WDC DEF 14A filed Dec 15, 2006.
Compensation for Mr. Shakeel
Mr. Shakeel became Chief Executive Officer of Western Digital effective October 1, 2005 pursuant to an Employment Agreement he entered into with Western Digital on August 25, 2005. Pursuant to this agreement, effective October 1, 2005, Mr. Shakeels base salary, paid bi-weekly, increased to $800,000 and his target annual bonus under the ICP increased to 100% of his base salary, resulting in bonus payments earned by Mr. Shakeel during fiscal 2006 under the ICP of $1,258,000. Mr. Shakeel also received a grant of 1,250,000 shares of restricted common stock of Western Digital. Subject to Mr. Shakeels continued employment by Western Digital, 500,000 of these shares of restricted stock will vest on January 1, 2007 and the remaining 750,000 of these shares of restricted stock were to vest on January 1, 2008. In addition, pursuant to the agreement, the entire performance share award granted to Mr. Shakeel in fiscal 2005 was cancelled as were 28,333 unvested shares of restricted stock and 78,125 shares of common stock subject to stock options granted to Mr. Shakeel that were scheduled to vest after December 31, 2007. Mr. Shakeels Employment Agreement with Western Digital has been subsequently amended, and the terms of the amendment are described below under Employment Contracts, Termination of Employment and Change in Control Arrangements beginning on page 27.
The Committee worked with an independent compensation consulting firm in formulating and structuring the compensation package for Mr. Shakeel. While Mr. Shakeels total direct compensation, including his award of restricted stock, was determined to be between the 50th and 75th percentile of competitive market benchmark data, a significant portion of Mr. Shakeels compensation remains subject to possible downside risk given the volatility of Western Digitals stock over short to medium-term periods. In addition, the cancellation of Mr. Shakeels performance share award as well as portions of his outstanding stock options and restricted stock represented significant lost value for Mr. Shakeel, even though the awards would normally have required Mr. Shakeel to remain employed with Western Digital beyond the term of his employment agreement. Further, in approving the terms of Mr. Shakeels employment agreement, the Committee also considered the fact that Mr. Shakeel demonstrated an excellent track record of strong operating performance at Western Digital during his tenure as Chief Operating Officer and the need to retain his services.
The Committee continues to believe that, in light of Mr. Shakeels individual performance and his unique contribution to Western Digitals performance during fiscal 2006, Mr. Shakeels salary, bonus and restricted stock award for fiscal 2006 were both competitive and fair and reasonable to Western Digital and its stockholders.