Kodak 2007 Annual Report Download - page 147

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• To the extent practicable, Kodak’s Director Compensation Principles should parallel the principles of the Company’s executive
compensation program.
Review
The Governance Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering
any changes to the Board’s compensation program. The Board reviews the Governance Committee’s recommendation and determines the
amount of director compensation.
In 2007, the Governance Committee completed a review of the Board’s compensation program. In connection with this review, the
Governance Committee retained Peal Meyer & Partners, independent compensation consultant, to competitively assess our director
compensation relative to market trends and comparable peer companies. The last time such a review was initiated by the Governance
Committee was in 2003.
The Governance Committee commenced its review by examining the current trends in director pay as presented by its independent
compensation consultant, including: the current board landscape, board pay levels, structure of board pay, director pay mix, board equity
pay, director pay mix, committee service and compensation, and stock ownership guidelines.
With this background in mind, the Governance Committee’s independent compensation consultant conducted a competitive review of
director pay levels and practices at peer companies. This analysis compared Kodak’s Board compensation to competitive market data from
a peer group of 20 companies. This peer group is the same group of companies that the Company uses to benchmark its share usage and
fair value transfer for executive compensation purposes. The companies within this peer group were selected by the Compensation
Committee’s independent compensation consultant with input from Pearl Meyer & Partners. A primary goal in compiling the peer group
was to have it be reflective of the Company’s transformation to a digital technology company. Annual revenues of the companies within
the peer group ranged from $5 billion to $94 billion, with the median being approximately $11 billion. The peer group consisted of the
following companies:
• Advanced Micro Devices
• Agilent Technologies
• Arrow Electronics
• Avaya
• Dover
• Flextronics International
• Hewlett-Packard
• Jabil Circuit
• Lexmark International
• Micron Technology
• Motorola
• NCR
• Sanmina-Sci
• Seagate Technology
• Solectron
• Sun Microsystems
• Texas Instruments
• Unisys
• Western Digital
• Xerox
Based on this peer group, the Governance Committee’s independent compensation consultant completed its review and reported that the
Company’s director compensation had fallen below the median compensation of its peer group and certain compensation components
were no longer consistent with market practices. A summary of the independent compensation consultant’s finding appears below:
• Total director compensation (defined as compensation for board service, not including committee service) was near the bottom of the
peer group.
• Committee compensation is at the peer group median with the exception of the Audit Committee Chair, which is below the median.
• Director pay mix in terms of cash vs. equity and board pay vs. committee pay was nearly identical to the peer group median.
• The Company provides director benefits and perquisites not offered by most of the peer group.
• The Company’s director stock ownership guidelines are in-line with the peer group.
Based on these findings, and by using the Board’s Director Compensation Principles as a guide, the Governance Committee’s
independent compensation consultant developed various proposals to address the deficiencies identified during its review. After reviewing
and considering these proposals, the Governance Committee made the following recommendations regarding the Board’s compensation
program which were approved by the Board at its November 14, 2007 meeting:
• Set the annual cash Board retainer at $70,000. Previously, non-employee directors annually received $80,000 as a retainer, at least
half of which had to be taken in stock or deferred into stock units.
• Denominate the equity board retainer in dollars. Increase the annual equity retainer to $70,000 of full value shares of restricted stock
and $70,000 of stock options. Previously, non-employee directors annually received 1,500 restricted shares of the Company’s stock
and 1,500 stock options.
• Continue a one-year vesting schedule on both stock and stock options.