Baker Hughes 2009 Annual Report Download - page 32

22 Baker Hughes Incorporated
Perquisites and Perquisite Allowance Payments
In order to remain competitive with the Peer Group and
ensure our ability to attract and retain capable Senior Execu-
tives, the Company also provides perquisites that are common
to executives in the United States and in our industry. The
Compensation Committee annually reviews the perquisite pro-
gram to ensure competitiveness and fairness. Executives are
provided with the following benefits as a supplement to their
other compensation:
• Life Insurance & Accidental Death & Dismemberment Cover-
age: We pay 100% of the premium for both term life insur-
ance and accidental death and dismemberment coverage,
equal to two times the Executive’s base salary.
• Perquisite Life and Accidental Death and Dismemberment
Insurance: Perquisite life and accidental death and dismem-
berment insurance benefits are provided to the Executives in
addition to the supplemental life insurance and voluntary
life insurance and accidental death and dismemberment
coverage available to all employees. The cost of the perqui-
site life and perquisite accidental death and dismemberment
insurance is paid from the Executive’s perquisite allowance
(as discussed below).
• Short-Term and Long-Term Disability: We pay 100% of the
premium cost for these benefit programs for Executives. The
short-term disability program provides income replacement
at 100% of base pay level for up to six weeks or recovery.
The program then pays 75% of the base pay level begin-
ning on week seven up to 26 weeks or recovery. Upon the
expiration of the 26-week short-term disability period, the
long-term disability program provides income replacement
at 60% of the benefits base pay level, up to a maximum of
$25,000 per month, until age 65 or recovery per the terms
and conditions of the program.
• Executive Physical Program: At our expense each Executive is
allowed to have a complete and professional personal physi-
cal exam on an annual basis.
In addition Senior Executives are provided with a cash
allowance on a quarterly basis that is intended to pay for
expenses associated with managing finances, healthcare, com-
munication and entertainment. These expenses are associated
with continued employment yet are not considered and may
not be reported as business expenses. It is common practice in
our industry to provide these personal benefits as perquisites.
The Compensation Committee has chosen to provide a cash
allowance in lieu of providing these benefits directly to Senior
Executives, for greater transparency in the value of such bene-
fits and clarity around income tax treatment. While the Com-
pensation Committee intends for such allowance to be applied
to applicable benefits, the Senior Executive may apply such
amounts to any use in their own discretion.
In addition to the Company-provided basic life insurance
coverage of two times the Senior Executive’s base salary, Senior
Executives may elect additional life insurance coverage through
the perquisite program. Additional information regarding these
benefits and an accompanying narrative disclosure are provided
in the Summary Compensation Table disclosed on page 27.
Severance Plan
Upon certain types of terminations of employment (other
than a termination following a change in control of the Com-
pany), severance benefits may be paid to the Senior Execu-
tives. Additional severance benefits payable to our PEO are
addressed in his employment agreement discussed below. The
Senior Executives are covered under a general severance plan
known as the Baker Hughes Incorporated Executive Severance
Plan (the “Severance Plan”). The Severance Plan is designed
to attract and retain Senior Executives and to provide replace-
ment income if their employment is terminated because of an
involuntary termination other than for cause.
To be eligible to receive benefits under the Severance Plan,
a Senior Executive must (i) be an Executive on the date of ter-
mination, (ii) be involuntarily terminated and (iii) execute and
deliver to the Severance Plan’s Administrator a release agree-
ment provided to the participant by the Severance Plan
Administrator. No benefits are available or have accrued prior
to a participant’s employment termination date, and no rights
are considered vested until the occurrence of an involuntary
termination. We provide the following benefits to a participant
who has satisfied the eligibility requirements.
• Base Compensation – We will pay the participant a single
sum cash severance benefit based on the participant’s base
compensation at the participant’s employment termination
date, with the amount of the base compensation benefit
determined pursuant to the table below.
• Outplacement – Each participant shall be entitled to out-
placement assistance at the expense of the Company as
shown in the table below.
Severance Plan – Schedule of Benefits for NEOs
Severance Benefits Details of Benefit
1. Base Compensation 18 months of base compensation using the participant’s base compensation for
the month in which the participant’s employment termination date occurs.
2. Outplacement Outplacement services will be provided for the greater of 12 months or until such
time as the value of the outplacement services reaches the maximum of $10,000.
The 12-month period commences with the first day of the month following the
month in which the participant’s employment termination date occurs.