Alaska Airlines and Horizon Air 2007 Annual Report Download - page 52

How the Elements of our Executive
Compensation Program were Selected
The Compensation Committee conducts an
annual review of the Company’s executive
compensation to ensure that it is structured to
satisfy our objectives. The Committee considers
how each component of compensation motivates
executives to help the Company achieve its
performance goals and how it promotes retention
of executives who share the Company’s values.
Our compensation structure is designed to
promote initiative, resourcefulness and
teamwork by key employees whose performance
and responsibilities directly affect our results of
operations.
The Committee utilizes both fixed
compensation and variable performance-based
compensation to achieve a balanced program
that is competitive and fair. Base salaries,
benefits, perquisites, retirement benefits, and
change in control benefits are primarily intended
to attract and retain highly qualified executives.
Base salaries, benefits and perquisites are
service-based and are paid out on a short-term or
current basis. These are the elements of the
Company’s executive compensation program
where the value of the benefit in any given year
is not dependent on performance (although base
salary and benefits determined by reference to
base salary may increase from year to year
depending on performance, among other things).
Annual incentives and long-term equity-
based incentives are intended to motivate
executives to achieve specific performance
objectives. Annual incentives, based on the
achievement of objective performance goals and
long-term equity-based incentives are paid out on
a longer-term basis. We believe that this mix of
short-term and longer-term compensation allows
us to achieve our dual goals of attracting and
retaining highly qualified executives with an
entrepreneurial spirit and providing meaningful
performance incentives for those executives.
Executive Pay Mix and the Emphasis on
“At Risk” Pay
The Compensation Committee believes that
emphasis on “at risk” compensation at the
senior executive levels of the Company is a key
element in achieving a pay-for-performance
culture, since it aligns management’s interests
with those of the Company’s stockholders.
Total direct compensation for a Named
Executive Officer is tailored to place a
substantial emphasis on “at risk” pay that is tied
to performance objectives. For 2007, the
Committee approved target-level compensation
for Mr. Ayer that is 80% “at risk” and tied to
stockholder value creation. With respect to the
other Named Executive Officers, the Committee
approved target compensation that is on average
67% “at risk” and tied also to stockholder value
creation.
67% “At Risk”
33% Base
Pay
80% “At Risk”
20% Base
Pay
Total Direct
Compensation of
Chief Executive Officer
Total Direct
Compensation of Other
Named Executive Officers
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