Kodak 2003 Annual Report Download - page 92

Proxy Statement
92
ITEM 5—Shareholder Proposal—
Compensation Limits
Robert D. Morse, 212 Highland Avenue, Moorestown, NJ, 08057-2717,
owner of over $2,000 in Company stock, submitted the following proposal:
Management and Directors are requested to consider discontinuing all
rights, options, SAR’s, and severance payments to the 5 top Management
after expiration of existing plans or commitments. This does not apply to
plans for lesser Managers or employees whom are offered reasonable
options or bonuses.
REASONING: Moderation is needed in corporate remuneration. Any person
can live very lavishly on $500,000.00 per year. Over-paying Management
has been ongoing and increasing for years. Many officials have been
awarded with no mention of what was accomplished above and beyond
expectation of their positions. The bookwork involved and expense is
tremendous in carrying out these programs. Peer group comparison and
commercial “Remuneration” entities have been employed by some to rec-
ommend payouts, having nothing to do with a performance record. The
product, its advertising, and its acceptance usually govern earnings.
When Management is hired for their position at a good salary, they are
expected to earn it, and not have to be paid more when and if they do.
Excess wealth passed on may make heirs non-workers, non-achievers
and an ongoing leech on society.
There are many good Management Training Schools in the United States
and the supply is available. Hiring away from other corporations is a
predatory process, increases costs and does not necessarily “align share-
owner/management relations”, with any gain to the shareowners. Think
about it! Vote YES for this proposal, it is your gain.
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
The Company uses the same principles in setting the compensation for all
Company employees. These principles are:
1. Total compensation should be tied to performance that increases share-
holder value and is consistent with the Company’s values.
2. Total compensation should be competitive with the total compensation
of similar companies to attract and retain talented employees.
3. Total compensation should be linked appropriately to both short-term
and long-term Company performance.
In this context, “total compensation” is comprised of base salary, annual
incentive and long-term incentive. The Company benchmarks these three
elements with the practices of other companies. All three elements of
compensation are considered independently in determining the appropri-
ate amount of total compensation for any given executive. This process is
described in the Report of the Executive Compensation and Development
Committee on pages 117-121.
In November 2003, the Company introduced the Leadership Stock
Program, which for most executives will replace stock option awards with
the opportunity to earn performance stock units. However, corporate
officers will continue to receive a portion of their long-term incentive
compensation in the form of stock options.
The Company believes this is appropriate since the Company’s officers are
most responsible for influencing the Company’s stock price. Stock options
are a type of long-term incentive which ties compensation directly to
increases in shareholder value. This serves to align the interests of the
Company’s corporate officers with those of the shareholders. Stock
options, as a component of total compensation, are designed with at least
two purposes in mind: one is to reward the recipient to the extent that
good company performance is reflected in an increase in the stock price,
and the second is to retain talented management. Stock options serve
both of these purposes, neither one to the detriment of the other.
The Board believes that both annual and long-term incentive compensa-
tion are important components of an executive’s total compensation. The
stock option component is an effective vehicle to link the interests of the
Company’s corporate officers with the interests of its shareholders. The
Company also believes that the use of severance arrangements in appro-
priate circumstances is favorable to the Company. The interests of share-
holders are best served when the Company is able to compete effectively
for executive talent by offering a complete and balanced executive com-
pensation program.
The Board of Directors recommends a vote AGAINST this proposal.