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Response to Say-on-Pay Vote
The Company has a history and a well-earned
reputation with its shareholders as a very transparent
organization. That commitment to transparency on all
levels was certainly a driving force in our decision in
2008 to allow shareholders a “say-on-pay” advisory
vote, far ahead of the requirement later imposed on
companies by the Dodd-Frank Wall Street Reform and
Consumer Protection Act. Prior to 2014, the reception
of this annual vote had been overwhelmingly favorable,
with endorsement rates from our shareholders that
have averaged more than 96% since its institution.
The favorable vote in 2014 (74%) was the lowest since
adding the advisory vote to our proxy. This served as
a focal point of many conversations surrounding
corporate governance in which the Company engaged
with our shareholders. The feedback from these
conversations was incorporated into the regular review
of compensation practices by the Compensation
Committee, which in turn conducted a thorough
analysis of best practices. The Compensation
Committee referenced both internal analysis and
analysis from the Consultant. The feedback resulting
from the Company’s shareholder engagement and
analysis indicated that the time lag, which resulted in
paying the CEO’s total compensation for a given year
based on performance measured over two proxy
seasons, was performance-based yet potentially
confusing and an outlier relative to best practice. After a
thorough and rigorous review of the compensation
structure, the Company validated the components and
performance measures used. In addition, to better align
our relative financial and TSR performance with the
CEO’s pay, some modifications were made to the
process for setting the CEO’s 2014 compensation. We
believe this modification to the CEO pay program
removes the timing disconnect that was concerning to
some under the prior method. Furthermore, the change
in 2014 reinforces our strong pay-for-performance
philosophy and eliminates having to report pay for a
given year over two proxy seasons. As discussed in
the “CEO Compensation and Pay-For Performance”
section below, our 2014 relative performance ranking
versus our peers
resulted in a decrease of 51% in total
direct compensation for the CEO
.
Moreover, for 2015, we have eliminated the overlap in
performance metrics used in the annual non-equity
incentive plan and long-term equity incentive plan. We
constantly analyze our practices to ensure that we
remain current in our approaches, a leader in executive
compensation best practices, and cognizant of
shareholder concerns. As such, we will continue our
review to determine if additional changes should be
made in 2015. As a company, we pride ourselves on
incorporating ethics and transparency into everything
we do, including compensation disclosure.
Summary of Executive Compensation Programs
As a leader in our industry segment, we recognize that
a sound management compensation program is a part
of what makes a company an employer of choice. Our
compensation philosophy is to provide pay that is
directly linked to the Company’s performance results.
Of these four pay elements set forth below, we consider
the annual and long-term incentive forms of
compensation to be the most important because they
represent the largest part of total rewards for
executives, and therefore provide the strongest link to
company results and shareholder value creation, while
also enabling us to attract, retain, motivate and reward
talented individuals who have the necessary skills to
manage our growing global enterprise on a day-to-day
basis, as well as for the future.
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