Kodak 2001 Annual Report Download - page 114

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Long-Term Incentives: Long-term compensation is delivered through stock options, the Performance Stock
Program and restricted stock.
The Company maintains a management stock option program. Stock options encourage the Company’s
executives to act as owners, which helps to further align their interests with the interests of the Company’s
shareholders. The Committee generally grants stock options once a year under this program. The options are
priced at 100% of the fair market value of the Company’s stock on the day of grant. The Company bases target
grant ranges on the median survey values of the companies it surveys. Grants to individual executives are then
adjusted based in large part on the executive’s performance potential.
To coordinate the timing of the management stock option grant with the annual management appraisal process,
awards will now be made in the fourth quarter, rather than the first quarter, of the year. As a result of this
change, two grants under the program were made in 2001; one in January 2001 and the other in November
2001. Assuming the Committee approves a grant for 2002, the awards will be made in the fourth quarter of
2002.
The Performance Stock Program places a portion of our top executives’ long-term compensation at risk. The
program measures performance over a three year period based on the Company’s total shareholder return
relative to those companies within the Standard & Poor’s 500 Composite Price Index. A description of the
program, as well as the threshold, target and maximum awards for the named executive officers appears on
page 20. Based on the Company’s performance over the three-year performance cycle ending in 2001, no
awards were paid for this cycle.
From time to time, the Company grants restricted stock awards to selected executives. These awards are
generally made to either (1) induce the recipients to remain with or to become employed by the Company; or
(2) recognize exceptional performance.
Share Ownership Program
The interests of the Company’s executives should be inseparable from those of its shareholders. The Company
aims to link these interests by encouraging stock ownership on the part of its executives.
One program designed to meet this objective is the Company’s share ownership program. Under this program,
each senior executive is required to own stock of the Company worth a multiple of his or her base salary. These
multiples range from one times base salary to four times base salary for the CEO.
To assist the program’s participants in meeting their ownership requirements, the Company permitted them to
receive their January 2001 stock option grant in the form of restricted units of the Company’s common stock.
For purposes of determining the number of units to be granted in place of the stock option award, the options
were valued at 90% of their then Black-Scholes value. As shown in the Summary Compensation Table on
page 17, all of the named executive officers elected to receive restricted stock units.
Today, the program applies to approximately 20 senior executives, all of whom have either satisfied or are on
track to satisfy the requirements.
Stock Option Exchange Program
Upon recommendation of the Committee, the Board of Directors approved the Stock Option Exchange
Program. The Company’s shareholders subsequently approved the plan amendments necessary to implement
this program at their Special Meeting on January 25, 2002. Under this program, all of the Company’s
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