Subject to payouts that are tied to performance targets other than global EBITDA, if the threshold target for global EBITDA has been achieved, additional bonus payouts up to the maximum annual opportunity can be earned for increases in global EBITDA beyond the specified threshold target for the year. For fiscal year 2007, maximum incentive award payouts would have been possible if global EBITDA had been approximately $60.3 million before payout of awards based on global EBITDA. Actual global EBITDA for 2007 was $52.3 million before payout of awards based on global EBITDA.
The target and maximum payout amounts for each of the NEOs for the 2007 Performance Incentive program are provided in the Grants of Plan-Based Awards table on page 23 of this proxy statement. On October 16, 2007, the Board approved payment of the following incentive bonus amounts for fiscal year 2007 performance:
| Executive Officer | Title | FY2007 Annual Incentive Opportunity (As % of Base Salary) |
FY2007 Actual Bonus as a Percent of Opportunity |
FY2007 Bonus Paid |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Garry O. Ridge | Chief Executive Officer | 100 | % | 53.5 | % | $ | 286,634 | |||||||
| Michael J. Irwin | Executive Vice President and Chief Financial Officer | 60 | % | 53.5 | % | $ | 85,520 | |||||||
| Graham P. Milner | Executive Vice President, Global Development, Chief Branding Officer | 60 | % | 34.5 | % | $ | 49,383 | |||||||
| Michael L. Freeman | Division President, the Americas | 60 | % | 32.5 | % | $ | 52,020 | |||||||
| William B. Noble1 | Managing Director, Europe | 60 | % | 50.9 | % | $ | 106,830 | |||||||
1 Mr. Noble’s bonus has been converted to dollars at the Company’s financial reporting exchange rate for August 2007 of $2.0364 per pound.
Also on October 16, 2007, the Board approved the Performance Incentive program for fiscal year 2008, including the specific EBITDA, gross margin and ROIC target amounts. There were no changes in the weightings or formulas to be applied in calculating the incentive award payouts for any Company employees, including the NEOs, for 2008.
Equity Compensation
Equity compensation is a critical component of the Company’s efforts to attract and retain executives and key employees, encourage employee ownership in the Company, link pay with performance and align the interests of executive officers with those of stockholders. The Company provides NEOs with an economic interest in the long-term appreciation of the Company’s common stock though the annual grant of stock options. Stock options provide value only if the Company’s stock price increases (which benefits all stockholders), and only if the executive remains with the Company until options vest.
The Board recognizes the potentially dilutive impact of stock options. The Company designs its option grant practices to balance the impact of dilution and the Company’s need to remain competitive by recruiting, retaining and providing incentives for high-performing employees. The Board takes the following steps to maintain this balance:
- The Company’s aggregate stock granting practices are conservative, particularly with respect to options awarded to the NEOs; the Committee seeks to manage to an annual gross burn rate for stock options awarded to all participating employees that does not exceed 2% of the Company’s outstanding shares. The actual burn rate over the past three years has been approximately 1.6%.
- Equity grants to individual executive officers are generally based on Company/individual performance in the preceding year, as well as on the expected future contribution and long-term retention goals for the executive officer.
In October 2006, the Board approved stock options granted to the NEOs as set forth in the Grants of Plan-Based Awards table on page 23 of this proxy statement.
Benefits and Perquisites
As is the case with most Company employees, the Company’s NEO’s are provided with standard health and welfare benefits, as well as the opportunity to participate in a 401(k) profit sharing plan. The 401(k) plan serves to provide Company employees, including the NEOs with tax-advantaged retirement savings as an additional component of overall compensation. The Company’s contributions to the Plan may be invested by employees in a Company Stock Fund invested in shares of the Company’s common stock.
The Company maintains individual Supplemental Death Benefit Plan agreements with each of the NEOs other than Mr. Noble who has an equivalent life insurance benefit under his local U.K. compensation package. The Company also maintains individual Supplemental Retirement Benefit Plan agreements with each of the NEOs. The terms of these plan agreements and the specific benefits provided to each of the NEOs are set forth in the narrative description of benefits included with the Summary Compensation Table and the Supplemental Retirement Benefits table on pages 22 and 26, respectively, of this proxy statement. Since the Supplemental Retirement Benefit Plan agreements only provide a benefit to the NEO if he continues in the employment of the Company until age 65, the Committee is presently reviewing the terms and conditions of the agreements to determine whether alternative forms of long term compensation would provide a greater mutual benefit to the Company and the NEOs. The existing agreement benefits are funded by permanent life insurance policies owned by the Company that also serve to fund the Supplemental Death Benefit Plans.
The Company also provides cars to its executives and private health insurance for Mr. Noble in excess of coverage available to other Company employees in the U.K. The costs associated with the benefits and perquisites provided to the NEOs are included in the Summary Compensation Table included on page 22 of this proxy statement and they are separately identified in the narrative description of such benefits included with the Summary Compensation Table.
The Compensation Committee considers the cost of the foregoing benefits and perquisites in connection with its recommendations to the Board for approval of the CEO’s compensation package and in connection with approval of the total compensation for each of the other NEOs. All of such costs are considered appropriate in support of the Compensation Committee’s objective of attracting and retaining high quality executives, because they are common forms of compensation for senior executives and are expected by such executives when they consider competing compensation packages.
Post-Employment Obligations
In February 2006, the Company entered into change of control severance agreements with the Company’s NEOs. The specific terms of the agreements are described in detail on page 26 of this proxy statement. The agreements were entered into with the NEOs and other executive officers of the Company after extensive review by the Committee and the Board and negotiation with the officers to replace previously existing employment agreements. Consideration was given to possible inclusion of severance compensation to be paid to the officers in the event of their termination of employment without cause (or for good reason) without regard to the existence of a change of control of the Company. No such provisions were included and severance compensation is payable only following a termination of employment without “cause” or for “good reason” within 2 years following a “change of control” of the Company (as the quoted terms are defined in the severance agreements.)
The Committee believes that the change of control severance agreements help ensure the best interests of stockholders by fostering continuous employment of key management personnel. As is the case in many public companies, the possibility of an unsolicited change of control exists. The uncertainty among management that can arise from a possible change of control can result in the untimely departure or distraction of key employees. Reasonable change of control severance agreements reinforce continued attention and dedication of executives to their assigned duties and support the Compensation Committee’s objective of retaining high quality executives.