Kodak 2004 Annual Report Download - page 160
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E A S T M A N K OD A K C O M PA N Y
•Totaltargetcompensationforexecutivesshouldbemarketcompetitive.Marketcompetitiveisdefinedasthe50th
percentilewithdifferenceswherewarranted.
•Themixoftotalcompensationelementswillreflectcompetitivemarketrequirementsandstrategicbusinessneeds
takingintoaccountdifferencesinmanagingbusinessesfor“cash”andbusinessesfor“growth.”
•Asignificantportionofeachexecutive’scompensationshouldbeatrisk,withapositivecorrelationbetweenthe
degreeofriskandtheleveloftheexecutive’sresponsibility.
•Compensationislinkedtobothqualitativeandbehavioralexpectations,andkeyoperationalandstrategicmetrics.
•InterestsofexecutivesarelinkedwiththeCompany’sownersthroughstockownership.
•Executivecompensationwillbedifferentiatedonthefollowingbases:
•basesalaries—onrelativeresponsibility,
•short-termvariableelements—onperformance,and
•long-termvariableelements—onCompanyperformanceandindividualexecution/leadership.
TheCommittee’sexternalconsultantconcludedthattheCompany’sexecutivecompensationgoalsandprinciplesarealignedwiththeCompany’snew
businessstrategy.
EXECUTIVECOMPENSATIONPRACTICES
Surveys
Eachyear,theCompanyparticipatesinsurveysconductedbyexternalconsultants.ThecompaniesincludedinthesesurveysarethosetheCompany
competeswithforexecutivetalent.Most,butnotall,ofthesecompaniesareincludedintheDowJonesIndustrialIndexshowninthePerformanceGraph
onpage55.
PeerCompanies
Startingin2002,theCompanyalsobeganmeasuringthecompetitivenessofitsexecutivecompensationprogramagainstacomparisongroupofapproxi-
mately15otherleadingcompanies,referredtointhisReportasthe“PeerGroup.”ThefollowingcriteriawasusedtoselectthePeerGroup:marketcapital-
ization;revenue;consumer/commercial/hi-techmix;mixofhighgrowthandsteadygrowthcompanies;andsimilarindustryanddataavailability.Thedata
receivedfromthePeerGroupissizeadjustedsopropercomparisonsmaybedrawn.BasedonthesurveydataandPeerGroupresultsandconsistentwith
theCompany’sexecutivecompensationprinciples,thetargetcompensationoftheCompany’sseniorexecutivesissetatmarket-competitivelevels.
MarketCompetitiveness
In2004,theCommittee’sexternalconsultantanalyzedthemarketcompetitivenessofeachelementofcompensationpaidtotheCompany’sexecutive
officerscomparedtothatofthePeerGroup.Theconsultantconcludedthatthetotalcompensationfortheexecutiveofficerswasbelowmarketmedian,
andwouldhaveclusteredaroundmarketmedianhadtheCompany’sstockperformedattheStandard&Poor’s500median.WithregardtotheCompany’s
long-termincentives,theconsultantindicatedthatshareusageandcostsarereasonablerelativetomarketpractice.TheCommitteeregularlyreviews
shareutilizationandoverhang.During2004,theCompany’soverhangonafullydilutedbasisconsistentlydeclinedandwasbelowthemedianoverhang
withrespecttotheCompany’sPeerGroup.TheconsultantinformedtheCommitteethatwhiletherewasalignmentbetweenthebusinessstrategyand
theexecutivecompensationstrategyandnoneedforsignificantdesignchangestotheCompany’sexecutivecompensationprograms,executionofthe
Company’sexecutivecompensationprogrammaybeenhancedthroughemphasisonvariableincentives,particularlyequity.TheCommitteehasdirected
theCompanytoaddressthisissuein2005.
MarketValueTransfer
TheconsultantnotedthattheCompany’smarketvaluetransfer,whichmeasuresthevalueofacompany’saggregatelong-termincentiveawardsex-
pressedasapercentofmarketcapitalization,isrelativelylowincomparisontothePeerGroup.
CommitteeDecision-MakingPractice
ItisthegeneralpracticeoftheCommitteetomakemostcompensationdecisionsinatwo-stepprocess.Thatis,generallythematterisdiscussedata
meeting,buttheCommitteedoesnotmakeadecisionregardingthematteruntilthefollowingmeeting.
Executive
Compensation
Principles