Kodak 2006 Annual Report Download - page 197

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ADDITIONAL EXECUTIVE COMPENSATION PRINCIPLES
Use of Tally Sheets
In 2006, the Committee reviewed all components of our Named Executive Offi cers’ compensation using various tools, including tally sheets prepared
by the Committee’s independent consultant. The tally sheets provided a comprehensive view of each Named Executive Offi cer’s compensation in a
three-part analysis. First, the tally sheets provided an estimate of projected 2006 compensation, including total cash compensation, the total value of
annual long-term equity incentive awards and the value of benefi ts and perquisites received by each Named Executive Offi cer. Second, the tally sheets
projected the value of stock awards held by each Named Executive Offi cer at three different assumed stock prices ($21, $28 and $40) as determined
by the Committee’s independent compensation consultant. Third, the tally sheets provided a summary of severance benefi ts as of December 31, 2006
under various leaving scenarios. The Committee conducted this review in order to holistically assess our Named Executive Offi cers’ total compensa-
tion and, in the case of severance and change-in-control scenarios, the potential payouts.
Policy on Qualifying Compensation
When designing all aspects of compensation, the Company considers the impact of tax treatment, but the primary factor infl uencing program design
is the support of business objectives. Annual bonuses payable under our EXCEL plan are designed to satisfy the requirements for performance-
based compensation as defi ned in Section 162(m) of the Internal Revenue Code. Stock options and Leadership Stock are also intended to satisfy the
requirements for performance-based compensation as defi ned in Section 162(m). Awards earned under the Company’s 2006 Executive Performance
Share Program do not qualify as performance-based compensation within the meaning of Section 162(m) and therefore may not be fully deductible
by the Company. Additionally, in modifying the performance criteria for the 2005-2006 Leadership Stock Program, the Committee recognized that any
awards earned under this plan would no longer satisfy the requirements for performance-based compensation as defi ned in Section 162(m) and would
not be fully deductible. However, the Committee determined that the loss of IRS Code Section 162(m) deductibility was not a decisive factor for either
plan because Kodak was not expected to have a signifi cant tax liability in 2006.
Given the fact that bonuses for 2006 performance were awarded to Named Executive Offi cers in lieu of the EXCEL plan, these bonuses would not
qualify as performance-based compensation within the meaning of Section 162(m).
Share Ownership Program
In order to link the interests of our executives with those of our shareholders, the Company has a share ownership program. All executive offi cers
are required to retain a specifi ed percentage of shares attributable to stock option exercises or the vesting or earn-out of full value shares (such as
restricted shares or Leadership Stock) until they attain specifi ed ownership levels, which are expressed below as a multiple of base salary. To the
extent that an executive has not satisfi ed his or her share ownership level, any restricted stock units awarded under our Leadership Stock program or
EXCEL bonus paid in shares above an executive’s target must be retained by the executive. Restricted stock, restricted stock units, any shares held in
the executive’s account under Kodak’s Employee Stock Ownership Plan or Savings & Investment Plan, and any “phantom stock” selected by an execu-
tive as an investment option in the Executive Deferred Compensation Plan count toward meeting the executive’s share ownership requirement.
Our Named Executive Offi cers have the following share ownership requirements:
Level Salary Multiple Retention Ratio
Mr. Perez 5x 100%
Mr. Sklarsky
Mr. Brust 3x 75%
Mr. Langley
Mr. Faraci 2x 75%
Ms. Hellyar
Mr. Meek