COMPENSATION
Compensation Discussion and Analysis
Elements of Compensation and Link to Strategy
We have three elements of total direct compensation: base salary, annual incentives and long-term incentives, which are described below.
We also provide limited perquisites (see page 59) and standard retirement and benefit plans (see pages 59 and 91).
2016 Total Direct Compensation Mix*
Other Named Executive Officers
Chairman and CEO
10%
13%
Base Salary
63%
Long-Term Incentives
27%
Base Salary
65%
Long-Term Incentives
22%
Annual Incentive
Annual Incentive
* Base salary, actual annual incentive and the grant date fair value of the annual long-term incentive award for 2016.
Base Salary
““Base salary is designed to recognize individual performance,
scope of responsibility, leadership skills and experience.
““Competitive base salaries help attract and retain executive talent.
COMPENSATION
““Base salary is fixed cash compensation. Salary is reviewed annually
and adjusted when appropriate. To promote a performance
culture, increases are not automatic or guaranteed. No Named
Executive Officer received an annual merit increase in 2017 as
the Company focuses on productivity.
Annual and Long-Term Incentives
IMPORTANT FACTS ABOUT OUR INCENTIVE TARGETS
Choice of Incentive Metrics
Rigor of Incentive Metrics
““The key financial metrics in our incentive plans (net operating
revenue, profit before tax, volume and economic profit growth)
align with our strategy for long-term value creation.
““In 2016, we enhanced the target-setting process to test
the robustness of our already strong incentive targets and
performance curve setting.
““We make certain adjustments when calculating results, such
as for the impact of foreign currency exchange rates, changes
in financial accounting reporting regulations, and costs
and other financial implications associated with corporate
transactions.
““The setting of our performance curves considered the following:
““Our targets are currency neutral because we believe incentive
targets should measure the underlying results of the business
and that business leaders should be encouraged to make
decisions that drive long-term sustainable growth rather than
to address short-term currency fluctuations or short-term and
nonrecurring items. This philosophy has been in place for
several years, and we review this issue regularly, as it is an
important concern for companies like ours with significant
exposure to foreign currency exchange rate fluctuations.
– Performance levels necessary to achieve our long-term
goals and deliver superior shareowner returns.
– The likelihood of achieving various levels of performance
based on historical results over a ten-year period.
– Metrics, program designs and results at companies in our
comparator group.
– Performance relative to our comparator companies.
““We have added a standing meeting each year to devote
additional time to this important process.
2017 Proxy Statement 51