Allstate 2012 Annual Report Download - page 39

The Committee uses the 50th percentile of our peer group of the pool. These limits established the maximum annual
as a guideline in setting the target total direct cash incentive awards that could be paid while preserving
compensation of our named executives. Within the deductibility under section 162(m). The Committee
guideline, the Committee balances the various elements of retained complete discretion to pay less than these
compensation based on individual performance, job scope maximum amounts, with actual awards based on the
and responsibilities, experience, and market practices. named executive’s target annual incentive award
opportunity and the achievement of performance
Mr. Wilson’s compensation is evaluated by the measures and assessments of individual performance as
independent compensation consultant in comparison to described below.
our peer group. In 2011, this analysis indicated that
Mr. Wilson’s target direct compensation was substantially Long-term Equity Incentive Awards
below our benchmark guideline of the 50th percentile of
our peer group. We grant equity awards to executives based on scope of
responsibility, consistent with our philosophy that a
Salary significant amount of executive compensation should be in
the form of equity and that a greater percentage of
Executive salaries are set by the Board based on the compensation should be tied to performance for
Committee’s recommendations. In recommending executives who bear higher levels of responsibility for
executive base salary levels, the Committee uses the 50th
Allstate’s performance. Additionally, from time to time,
percentile of our peer insurance companies as a guideline, equity awards are also granted to attract new executives.
which allows Allstate to compete effectively for executive The Committee annually reviews the mix of equity
talent. Annual merit increases for the named executives incentives provided to the named executives. Since 2009,
other than the CEO are based on evaluations of their the mix has consisted of 65% stock options and 35%
performance by the CEO, Committee, and Board, using restricted stock units, because we believe stock options
the average enterprise-wide merit increase as a guideline. are a form of performance-based incentive compensation,
An annual merit increase for the CEO is based on an requiring growth in the stock price to deliver any value to
evaluation of his performance and market conditions by an executive. The restricted stock units provide alignment
the Committee and the Board. with stockholder interests along with an effective
retention incentive. As noted above, beginning with
Annual Cash Incentive Awards awards made in 2012, the mix of equity incentives will
In 2011 executives could earn an annual cash incentive change to 50% performance stock awards and 50% stock
award based on Allstate’s achievement of performance options.
measures during the year and assessments of individual
performance. Timing of Equity Awards and Grant Practices
In order to qualify annual incentive awards paid to our Typically, the Committee approves grants of equity awards
named executives as deductible performance-based on an annual basis during a meeting in the first quarter,
compensation under section 162(m) of the Internal after we announce fourth quarter and full-year results.
Revenue Code, the aggregate annual incentive awards The timing allows the Committee to align direct
earned by the named executives, except for the CFO, compensation elements with our performance and
cannot exceed a pool equal to 1.0% of Adjusted business goals. Throughout the year, the Committee
Underlying Operating Income (defined on page 52). As grants equity incentive awards to newly hired or promoted
CFO, Mr. Civgin is not covered by section 162(m) of the executives, and in recognition of outstanding
Internal Revenue Code. Therefore, Mr. Civgin’s annual achievements.
incentive award is not subject to the Adjusted Underlying Under authority delegated by the Board and Committee,
Operating Income pool. For the other named executives, equity incentive awards to employees other than executive
the maximum award that could be earned was a given officers also may be granted by an equity award
percentage of the Adjusted Underlying Operating Income committee, which currently consists of the CEO. The
pool (but in no event greater than the $8.5 million Committee receives a list of equity awards granted by the
maximum set forth in the Annual Executive Incentive equity award committee at each regularly scheduled
Plan). The CEO can earn up to 45% of the pool, while the meeting. The equity award committee may grant
next two highest-paid named executives can earn up to restricted stock units and stock options to newly hired
20% each, and the third highest-paid can earn up to 15%
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Executive Compensation
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