Alaska Airlines and Horizon Air 2013 Annual Report Download - page 54

EXECUTIVE COMPENSATION
Consideration of Say-on-Pay Advisory Vote
At the May 2013 annual meeting, 99% of
the votes were cast in favor of the advisory
say-on-pay proposal in connection with the
Company’s 2012 compensation. In 2011
and 2012, the advisory vote on 2010 and
2011 compensation garnered approval of
94% and 97% of votes cast, respectively.
The Committee believes that the vote
indicate that most stockholders approve of
the structure of executive compensation at
Alaska Air Group and, therefore, the
Committee structured executive
compensation for 2013 in a way that is
generally consistent with that of 2012.
Stockholders will have an opportunity
annually to cast an advisory vote in
connection with executive compensation.
2013 Compensation Program Overview
The Company’s executive compensation
program is designed to compensate
executives appropriately and competitively
and to drive superior performance. Because
the Named Executive Officers are primarily
responsible for the overall execution of the
Company’s strategy, a high percentage of
their total direct compensation is variable
and tied to Company performance, thereby
providing incentives to achieve goals that
help create value for stockholders.
Highlights of the program, which did not
change materially from 2012, follow.
• For 2013, the Committee approved
target-level total compensation for
Mr. Tilden that is 80% variable and tied
to stockholder value creation. With
respect to the other Named Executive
Officers, the Committee approved target
total compensation that is, on average,
72% variable and tied to stockholder
value creation.
• Executives’ bonuses under the
Company’s annual incentive program are
based on the achievement of specific
performance objectives (broadly
applicable to all employees) that are
established at the beginning of the fiscal
year by the Committee and are capped at
a specified maximum amount. As
illustrated in the 2013 Performance-
Based Pay Calculation table, the annual
incentive plan paid out above target this
year primarily as a result of record
profitability and excellent safety,
operational and customer satisfaction
scores.
• Executives’ equity incentive awards
generally consist of a combination of
stock options, time-based restricted
stock unit awards, and restricted stock
unit awards that vest only if specified
performance levels are achieved. The
annual performance-based equity awards
that were granted at the beginning of
2011 vested at the end of 2013 and
were based on the Company’s total
shareholder return relative to that of a
peer group of airline companies. For
performance-based equity awards
granted at the beginning of 2012 and
2013, the three-year vesting is based
50% on shareholder return relative to the
peer group and 50% relative to the
Standard and Poors 500 Index. Tying
these rewards to total stockholder return
ensures that an executive’s opportunity
to benefit under the award is directly
linked to the creation of value for
stockholders. To further enhance the link
between the interests of executives and
stockholders, all of the Company’s
elected officers are expected to hold, at
a minimum, a specified level of Company
stock as set forth in the Company’s
stock ownership policy. As of the record
date, Mr. Tilden held Company stock
valued at more than twenty times his
ŠProxy
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