Alaska Airlines and Horizon Air 2007 Annual Report Download - page 51

COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
This section contains a discussion of the
material elements of compensation earned
during 2007 by our Named Executive Officers
listed in the Summary Compensation Table
below: Chief Executive Officer (CEO) of Alaska Air
Group, Inc. Bill Ayer; Chief Financial Officer of
Alaska Air Group, Inc. Brad Tilden; Jeff Pinneo,
the CEO of operating subsidiary Horizon Air
Industries, Inc.; and Gregg Saretsky and Kevin
Finan, two elected officers of subsidiary Alaska
Airlines who have or had policy-making roles at
the Alaska Air Group level. Mr. Finan retired on
January 1, 2008.
The structure of our executive compensation
program is designed to compensate executives
appropriately and fairly and to drive superior
performance. For our Named Executive Officers,
a high proportion of total direct compensation is
“at risk” and tied to the success of the Company
because they are the leaders primarily
responsible for the overall execution of the
Company’s strategy. The strategic goals of the
Company are reflected in our incentive-based
executive compensation programs so that
executives’ interests are aligned with
shareholder interests. Executive compensation is
designed to be internally equitable, reflective of
the business challenges facing the Company,
and scaled to the industry.
Objectives of our Executive Compensation
Program
The objectives of the Company’s executive
compensation programs are as follows:
• to attract and retain highly qualified
executives who share our Company
values and commitment to the
Company’s 2010 strategic plan by
designing the total compensation
package to be entrepreneurial, fair, and
competitive with appropriate reference
points as described below;
• to motivate executives to provide
excellent leadership and achieve
Company goals by linking short-term
and long-term incentives to the
achievement of specific goals as
reflected in executives’ personal
commitment plans, the Performance-
Based Pay plan, and the Company’s
2010 strategic plan;
• to align the interests of executives,
employees, and stockholders by tying a
large portion of our executives’ total
direct compensation (base salary, short-
term incentive pay, and equity awards)
to the achievement of objective goals
related to the Company’s safety record,
cost structure, employee engagement
and profitability; and
• to provide executives with reasonable
security, through a combination of
performance-based incentives,
retirement plans and change in control
agreements that motivate them to
continue employment with the Company
and achieve goals that will help the
Company remain competitive and thrive
in the long term.
How Executive Compensation is
Determined
The Role of the Compensation Committee,
Management and Consultants
Our Compensation Committee determines
and approves Mr. Ayer’s compensation. Mr. Ayer
recommends compensation for the other Named
Executive Officers and the Compensation
Committee approves it. None of the other Named
Executive Officers have a role in determining
executive compensation.
The Committee retained Deloitte Consulting
to provide advice with respect to trends in
executive compensation, determination of pay
programs, assessment of competitive pay levels
and mix (e.g., proportion of fixed pay to incentive
pay, proportion of annual cash pay to long-term
incentive pay), and setting compensation levels.
In 2007, Deloitte Consulting reviewed our peer
group companies (identified below) and assisted
the Committee with the collection and analysis of
current executive compensation data for these
peer group companies. The Compensation
Committee utilizes consulting advice in its
deliberative process in addition to the other
factors discussed below.
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