performance, primarily based upon the CEO’s achievement of our company’s objectives for the year. At the end
of this process, the Compensation Committee determines the CEO’s merit increase and approves or recommends
changes to the merit increases for the remaining executive officers. Our CEO has no role in determining his own
compensation.
The executive officers’ new salaries for each year are calculated as follows:
•
Current Base Salary (x) Merit Increase = Increase to Base
Salary
•
Current Base Salary (x) Increase to Base Salary = NewBase
Salary
For example, Dr. Crooke’s 2015 salary of $800,518 was
calculated as follows:
2014 Base Salary
(x) Merit Increase
= Increase to Base Salary
$768,252
(x) 4.2%
= $32,266
Current Base Salary
(+) Increase to Base Salary
= NewBase Salary in 2015
$768,252
(+) $32,266
= $800,518
When reviewing salaries, the Compensation Committee noted that our CEO’s salary, and the salary of three
of our other NEOs, was greater than the 50
th
percentile of the Executive Peer Group (two were below the 50
th
).
The Compensation Committee also noted its desired target mix of compensation is less weighted on salary and
historically did not increase base salaries for the CEO, COO and most of the other NEOs for 2011-2013 to help
adjust total pay mix so that it was weighted less heavily on fixed cash compensation. Given Isis’ outstanding
2014 performance, and given that most salaries were fixed for three years, the Compensation Committee
approved merit increases to each of the NEO’s salaries for 2015.
MBO-Performance Based-At Risk Cash Compensation (Performance MBO)
The next component of an executive officer’s compensation, as well as the compensation of our employees
at the director level and above, is a performance based cash payment through our PerformanceMBO program.
Our PerformanceMBO program rewards employees for reaching specific objectives and for the judgment they
use in making decisions, while an employee’s base salary compensates the employee for his or her continued
service and performance. We do not guarantee a PerformanceMBO as compensation. It is totally at risk. As
such, a PerformanceMBO represents an opportunity for reward based upon the individual’s level of
accountability and depends on the relative success of both Isis and the individual. Our approach for awarding
MBO bonuses differs from salary increases because, unlike salary increases, market forces do not impact bonus
amounts.
We calculate the actual amount of each executive officer’s respective PerformanceMBO based on the
following formula:
Base Salary (x) Target MBO% (x) Company Performance Factor (x) Individual Performance Factor =
PerformanceMBOAmount
Performance MBOs can be zero.
The multipliers in this formula ensure we award bonuses based on
both
Isis’ performance and individual performance. This means an employee may not receive a PerformanceMBO
even if he or she performed well in a year in which the Company does not meet its corporate objectives.
Similarly, if an employee performed poorly in a year in which the Company met its corporate objectives, he or
she may not receive a PerformanceMBO.
For example, in 1999 no PerformanceMBOs for executive officers were paid due to the failures Isis faced
at the time. In 2004 our CEO’s PerformanceMBOwas 64%of the PerformanceMBO he received in 2003
because of disappointing clinical trial results; the Company Performance Factor was 50% that year. Conversely,
in 2007 Isis had a seminal year and we rewarded our executive officers consistent with Isis’ success.
PerformanceMBOs can be, and
have in the past been, zero.
PerformanceMBOs have a
maximum limit.
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