Alaska Airlines and Horizon Air 2013 Annual Report Download - page 64

EXECUTIVE COMPENSATION
vest ratably over a four-year period on each
anniversary of the grant date.
Restricted Stock Units
The Company also grants long-term incentive
awards to the Named Executive Officers in
the form of restricted stock units. Subject to
the executive’s continued employment with
the Company, the restricted stock units
generally vest on the third anniversary of the
date they are granted and, upon vesting, are
paid in shares of Air Group common stock.
The units provide a long-term retention
incentive through the vesting period that is
not dependent solely on stock price
appreciation. The units are designed to
further link executives’ interests with those
of Air Group’s stockholders, as the value of
the units is based on the value of Air Group
common stock.
Performance Stock Units
The Company also grants the Named
Executive Officers performance stock units
annually as part of the long-term equity-
based incentive program. The performance
stock units vest only if the Company
achieves performance goals established by
the Committee for the performance period
covered by the award. (The table below
outlines specific goals.) Performance stock
units also provide a retention incentive as
the value of the award received is prorated
based on the executive’s status as an
employee during the performance period as
well as on the achievement of goals.
Grants were made for the three-year
performance periods beginning in January
2011, 2012 and 2013. In 2011, 100% of
the performance stock units granted were
tied to total shareholder return (TSR) as
compared to an industry peer group. These
performance stock units help to further link
the interests of executives with those of our
stockholders as the vesting of the units
depends on the Company’s TSR, and the
ultimate value of any portion of the award
that vests depends on the value of the
Company’s common stock. Beginning in
2012, performance stock unit awards were
based 50% on the Company’s TSR
performance relative to S&P 500 companies
and 50% relative to the following industry
peer group: Air Canada, Allegiant, AMR
Corporation, Delta Air Lines, Hawaiian
Holdings, JetBlue Airways, Republic Airways
Holdings, SkyWest, Southwest Airlines,
United Airlines/Continental, US Airways
Group, and WestJet. (The Committee may
adjust the peer group as it deems
appropriate if one or more of the peer
airlines cease to be publicly traded
companies or if peer companies merge.)
The Committee chose TSR as the
performance measure for these awards to
provide additional incentive for executives to
help create stockholder value. Given the
nature of the airline business, the
Committee believes that measuring TSR on
a relative basis rather than on an absolute
basis provides a more relevant reflection of
the Company’s performance by mitigating
the impact of various macro-economic
factors that tend to affect the entire industry
and that are largely beyond the control of
executives. The Committee believes that
also measuring the Company’s performance
relative to the broad market encourages
executives to manage the Company in such
a way as to attract a broader range of
investors.
The percentage of the performance stock
units that vest may range from 0% to 200%
of the target number of units subject to the
award, depending on the Company’s goals
for the performance period. The payout
percentages are interpolated for
ŠProxy
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