Baker Hughes 2010 Annual Report Download - page 28

16 B a k e r H u g h e s I n c o r p o r a t e d
Discretionary Bonuses
Discretionary bonuses provide flexibility to the Compensa-
tion Committee to, in its discretion, reward Senior Executives
for the achievement of specific, short-term performance goals.
For 2010, the performance goals for each of our Senior Execu-
tives were primarily related to the acquisition and integration
of BJ Services, the consolidation of the new business model
and organization implemented in 2009 as well as individual
performance goals. The measures for evaluating the success
of the implementation of the reorganization and individual
performance were subjective.
At the beginning of 2010, the PEO set specific individual
performance goals for each Senior Executive other than him-
self and the Compensation Committee established perfor-
mance goals for the PEO.
Mr. Deaton’s 2010 individual performance goals pertained
to the successful integration of BJ Services, achievement of
supply chain and manufacturing cost reduction targets,
achievement of goals related to diversity and safety and the
implementation of the monitor’s recommendations.
Mr. Ragauss’ 2010 individual performance goals related to
gaining efficiencies and maximizing administration and opera-
tional synergies from the BJ Services integration, completion of
the financial shared services outsourcing, achievement of days
sales outstanding goals and fully implementing the monitor’s
recommendations.
Mr. Craighead’s 2010 individual performance goals per-
tained to the successful integration of BJ Services, achievement
of supply chain cost reduction targets, efficiencies in the tech-
nology delivery program, establishment of a reservoir business
segment and the achievement of health, safety and environ-
ment targets.
Mr. Crain’s 2010 individual performance goals related to
the successful close of the BJ Services acquisition including
obtaining appropriate government approvals and agreement
with the monitor on compliance integration requirements,
achievement of BJ Services integration synergies, application of
risk reduction strategies as well as the achievement of diversity
goals within the legal function.
Mr. O’Donnell’s 2010 individual performance goals per-
tained to the successful integration of BJ Services, new prod-
uct revenue, market share, administrative cost reduction, days
sales outstanding, human capital goals pertaining to diversity,
attrition, recruitment and training as well as goals related to
heath, safety and environment.
The 2010 health and safety goals for Messrs. Deaton,
Craighead and O’Donnell were a motor vehicle accident rate
of less than or equal to 0.98. The rate is determined by multi-
plying the number of motor vehicles accidents by one million
hours, divided by the total kilometers driven. The actual motor
vehicle accident rate during 2010 was 0.97.
The Compensation Committee assesses the PEO’s perfor-
mance relative to the established performance goals and
determines whether or not a payout will be made. The same
process is conducted for the other Senior Executives taking
into account the recommendations of the PEO. No Senior
Executive has any guaranteed right to any discretionary bonus.
In determining discretionary bonus amounts the achievement
of (or failure to achieve) the performance goals under the
Annual Incentive Compensation Plan is not a factor that is
considered by the Compensation Committee.
The Compensation Committee has determined to award
Messrs. Deaton, Ragauss, Craighead, Crain, and O’Donnell
cash awards in the amounts of $915,000, $380,000,
$400,000, $320,000 and $150,000, respectively, based
upon their performance as compared to the established
performance goals described above.
The following table shows the discretionary bonus targets
for each of the Senior Executives. The bonus target for each
Senior Executive is reviewed by the Compensation Committee
each year and is set at market median in light of the Survey Data.
2010 Discretionary Bonus Targets for Senior Executives
Target Discretionary Incentive Compensation
Senior Executives % of Base Salary
C. Deaton 36%
P. Ragauss 27%
M. Craighead 27%
A. Crain 22.5%
J. O’Donnell 18%
Long-Term Incentive Compensation
The long-term incentive program allows Senior Executives
to earn compensation over a number of years as a result of
stock price performance and/or sustained financial performance
over multiple years. Long-term incentives comprise the largest
portion of a Senior Executive’s compensation package and are
consistent with our at-risk pay philosophy.
A primary objective of the long-term incentive plan is to
align the interests of Senior Executives with our stockholders
and to provide a balanced long-term compensation program.
The Compensation Committee determines the total stock
options, restricted stock, and cash-based performance units
granted to Senior Executives as well as the size of individual
grants for each Senior Executive. The amounts granted to
Senior Executives by the Compensation Committee vary each
year and are based on Survey Data, the Senior Executive’s
performance and the Senior Executive’s total compensation
package. Previous awards and grants, whether vested or
unvested, have no impact on the current year’s awards and
grants. Currently, long-term incentives are generally allocated
to Senior Executives as detailed in the chart below.
2010 Allocation Company Goals Future Value Dependent On
Performance Units: 30% Motivate differential financial performance Financial performance against peers
Stock Options: 40% Drive stock price Stock price appreciation
Restricted Stock Awards: 30% Retain executives Stock price appreciation