Ally Bank 2012 Annual Report Download - page 218

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Ally Compensation Program Overview and Philosophy
Working within the limitations imposed on our executive compensation by TARP, Ally's compensation philosophy has been, and
continues to be, that there should be a strong linkage between compensation and performance. We believe compensation should:
• Align with long-term value creation for our shareholders;
• Provide appropriate incentives based on individual, business, and Company performance;
• Encourage prudent, but not excessive risk taking;
• Provide a total compensation opportunity competitive with market practice; and
• Be internally equitable for the relative value of the employee's position at Ally.
In addition, our compensation plans are intended to achieve performance enabling us to complete the repayment to the U.S. taxpayers as
quickly as practicable.
Ally supports the compensation principles underlying the TARP compensation rules, and we believe our compensation philosophy is
consistent with the TARP compensation principles. The Special Master has required that the majority of compensation for NEOs and the next
20 highest-compensated employees be in the form of long-term stock or stock units, that such stock or stock units should be held for specified
minimum periods of time, and that any incentive payments should be subject to recoupment if paid based on information that is subsequently
found to be materially inaccurate. The Company and the Committee fully support and have implemented these principles for our NEOs and
the next 20 highest-compensated employees.
Refer to the Long-term Equity-based Incentives section for a discussion of the long-term stock awards that are granted to our NEOs.
The Pay Process for 2012
For 2012, the total compensation opportunity for the NEOs was determined by the Special Master, following review and approval of
recommended total direct compensation levels for each of the NEOs by the Committee.
On May 14, 2012, our indirect mortgage subsidiary Residential Capital, LLC (ResCap), and certain of its wholly owned direct and
indirect subsidiaries, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of New York (Bankruptcy Court). Further, and also on May 14, 2012, we announced that we were launching a process to
explore strategic alternatives with respect to our international operations. The Committee determined that the existing compensation structures
in place for Ally did not adequately address issues raised by these developments. As a result, the Committee sought and obtained the Special
Master's approval of certain modifications to the compensation structures for the NEOs and other senior executives of the company. The
purpose of the modifications was to better ensure that existing senior management was retained and remained fully focused on implementing
the announced steps as well as operating the ongoing businesses.
Effective with the bankruptcy filing of Residential Capital, LLC, compensation for all employees of Residential Capital, LLC, including
Thomas Marano, were under the purview of the Bankruptcy Court and not directly determined by Ally. Following the bankruptcy filing, Ally
and ResCap reached an agreement, memorialized by a Bankruptcy Court order, that clarified that Ally was financially responsible for
compensation issued to ResCap employees prior to May 14, 2012, and ResCap was financially responsible for compensation issued to
ResCap employees on or after May 14, 2012. Additionally, following the bankruptcy filing, at the request of the ResCap Board of Directors,
the Committee sought and obtained the Special Master's approval of a modified compensation structure for Mr. Marano and other employees
of ResCap whose compensation was restricted by TARP. The Special Master's Supplemental Determination Letter of November 30, 2012,
provides that no compensation awarded after May 14, 2012 to covered employees of ResCap should be in the form of Ally equity and all that
such compensation should be awarded in either cash or deferred cash. These modifications were also disclosed, as required, to the Bankruptcy
Court. All compensation paid to employees of ResCap after the deconsolidation of ResCap following the bankruptcy filing on May 14, 2012,
including Thomas Marano, is the responsibility of ResCap, and was therefore not reflected as compensation expense by Ally in its financial
statements for 2012.
Assessing Ally Compensation Competitiveness
We compare our total direct compensation against a peer group of other comparably sized financial services companies with whom we
compete for business and senior executive talent. We use publicly available reported pay data from a peer group of companies approved by
the Committee to conduct the competitive assessment for the CEO and principal financial officer positions. For the other NEO and senior
executive positions, we use market survey data from several survey sources to conduct the competitive assessments. Wherever practical, the
market surveys include companies that are part of the peer group approved by the Committee.
Table of Contents Ally Financial Inc. • Form 10-K