Page 25 - EndoProxy2012_final

endo | 100 Endo Boulevard | Chadds Ford, Pennsylvania 19317 19
Compensation Committee Actions
In response to the evolving nature of our business structure and our goal to strengthen our executive pay practices, special
emphasis has been placed on enhancing the effectiveness of our executive compensation decisions and policies. The fol-
lowing summarizes the actions taken by the Compensation Committee over the past two years:
Item Actions Reported in 2011 Actions Reported in 2012
Competitive
Considerations
• Revised “Data Point Companies” to appropriately
compare each NEO’s total compensation to execu-
tives in similar positions and with similar responsibili-
ties at similar companies of comparable size.
• In response to the Company’s recent acquisitions and
changing business, Hay Group recommended a recali-
bration of the of the Data Point Companies to include
a cross industry composite of organizations that
reflect the Company’s current business segments.
As a result of this review, the Compensation Commit-
tee approved the Data Point Companies.
Performance-Based
Annual Cash IC
• Initiated an annual performance management process
setting clear financial, strategic, portfolio and organi-
zational goals utilizing a well-defined scorecard that
closely links pay and performance.
• Adopted a compensation recovery policy (clawback)
relating to repayment of cash incentive awards by an
executive in the event of a restatement of the Com-
pany’s financial results; and
• Increased the level of performance required to reach
minimum, target, and maximum payout levels.
• Expanded annual performance management process
setting clear financial, strategic, portfolio and organi-
zational goals utilizing well-defined scorecards across
the Company’s various business segments that close-
ly links pay and performance;
• Approved the Company’s annual scorecard of objec-
tives and metrics to reflect business conditions and
the Company’s strategy;
• Increased the level of performance required to reach
minimum, target, and maximum payout levels; and
• Introduced profitability-based program funding crite-
ria in addition to the financial metrics already included
in the Company and business-level annual scorecards.
Equity-Based LTI
Compensation
• Moved from a “single trigger” to a “double trigger”
change in control provision in our 2010 Stock Incen-
tive Plan;
• Re-aligned the mix of the LTI awards to include per-
formance share units that may be earned based on
total stockholder return and revenue growth over a
three-year period to continue aligning compensation
with stockholder interests and the Company’s perfor-
mance; and
• Revised stock ownership guidelines for both non-
employee Directors and for Executive Management to
further align their interests with the interests of stock-
holders and promote Endo’s commitment to sound
corporate governance.
• Revised the peer group used to measure relative total
stockholder return performance for our performance
share unit (PSU) awards, since the Standard and
Poor’s (S&P) 1500 Healthcare Index is more broadly
representative of the overall healthcare environment
in which the Company operates; and
• Increased the level of performance required to achieve
minimum, target and maximum payout levels associ-
ated with the Company’s PSU cumulative target net
sales objectives.
Employment
Agreements
• The Company has affirmatively determined not to of-
fer new employees gross-up payments related to ex-
cise tax liabilities resulting from a change in control
– as demonstrated by the employment agreements
entered into with Mr. Levin and Ms. McHugh.
• The Company continued its practice of not offering
new employees gross-up payments related to ex-
cise tax liabilities resulting from a change in control
– as demonstrated by the employment agreements
entered into with Mr. Holveck and Dr. Gergel. Mr.
Holveck’s and Dr. Gergel’s employment agreements
were amended further to exclude automatic renewal
provisions.
Pay Risk • Conducted risk analysis of compensation arrange-
ments, policies and practices to determine whether the
Company’s compensation policies and practices create
risks that are reasonably likely to have a material ad-
verse effect on the Company.
• Continued with the practice of conducting annual risk
assessments of compensation arrangements, policies
and practices.