This excerpt taken from the WDC DEF 14A filed Sep 24, 2007.
Long-Term Incentive Program
In February 2006, following a review and analysis by Mercer, the Compensation Committee established a long-term incentive program pursuant to which a combination of stock options, restricted stock units and long-term performance cash awards are awarded to our executive officers and other key employees. As part of this long-term incentive program, the Compensation Committee has established long-term incentive guidelines expressed as a percentage of annual salary ranging from a minimum, midpoint and maximum value. The midpoint value of these guidelines is intended to target the executives total direct compensation at the median to the 75th percentile of the total direct compensation levels for comparable jobs in the marketplace based on market and peer group data.
These long-term incentive guidelines provide a framework for the Compensation Committee when determining the amount of the awards to each executive under the long-term incentive program. For each of our executive officers other than Mr. Coyne, the actual dollar value of the executives long-term incentive awards is determined by the Compensation Committee based upon the recommendation of Mr. Coyne after reviewing the executives responsibilities, individual performance, current compensation package, value of unvested equity awards and expected future contributions and value to the company. The Compensation Committee undertakes a similar analysis to determine the dollar value of any long-term incentive award to Mr. Coyne. Once this dollar value is set, approximately 40% is awarded in the form of stock options, 30% is awarded in the form of restricted stock units, and 30% is awarded in the form of a long-term performance cash award. Awards under the long-term incentive program are generally granted on an annual basis.
On November 27, 2006, as part of our long-term incentive program, the Compensation Committee awarded stock options, restricted stock units and long-term performance cash awards to three of our executives and other key employees. Payment of each long-term performance cash award is determined based on our achievement of specified operating income and revenue goals that correspond to specific payment percentages ranging between 0% and 200% for the performance period beginning July 1, 2006 and ending June 27, 2008. Depending upon our achievement of these predetermined performance goals, the cash awards will be paid within a reasonable period of time following the end of our 2008 fiscal year based on a percentage of the target award (ranging from 0% to 200%).
In accordance with the terms of their employment agreements with us, Mr. Massengill, Mr. Shakeel and Mr. Coyne did not participate in our long-term incentive program during fiscal 2007. The long-term incentive awards granted to our other executives in fiscal 2007 are set forth below: