Kodak 2008 Annual Report Download - page 160

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COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTION
The Executive Compensation and Development Committee, to which we refer in this discussion as the Committee, has oversight
responsibility for the Company’s executive compensation strategy. The Committee approves our compensation objectives, plans,
philosophy and forms of compensation for all executives, including our Named Executive Officers. In 2008, our Named Executive Officers
included our:
1) Chairman & Chief Executive Officer (CEO), Antonio M. Perez,
2) Executive Vice President (EVP) and Chief Financial Officer (CFO), Frank S. Sklarsky,
3) President and Chief Operating Officer (COO), Philip J. Faraci,
4) Executive Vice President and President, Film, Photofinishing and Entertainment Group (FPEG), Mary Jane Hellyar, and
5) Senior Vice President (SVP) and Chief Human Resources Officer (CHRO), Robert L. Berman.
Our Named Executive Officers for 2008 also included one former Senior Vice President, James T. Langley. Decisions for Mr. Langley can
be found on pages 45, 54, 65 and 71 of this Proxy Statement.
The 2008 year marked Kodak’s first year following its four-year transformation to a digital company. The focus of our business strategy and
key financial metrics for 2008 are described in the table below.
Our 2008 business strategy focused on: Our 2008 business metrics focused on:
• Our capabilities at the intersection of materials
science and digital imaging science;
• The profitable growth of our digital portfolio; and
• The continued management of a sustainable
business model implemented in 2007 for our
traditional businesses.
• Digital revenue growth;
• Cash; and
• Segment earnings from operations.
Management selected our 2008 business metrics because they provide insight to the Company’s ability to grow revenue from our digital
portfolio and generate cash and profitability.
To support our business strategy, our compensation philosophy continued to focus on attracting, retaining and motivating world-class
executive talent critical to the success of the Company’s business goals. During 2008, our compensation strategy focused on:
• Designing our annual variable pay and long-term incentive plans to be highly performance-based and to ensure a strong linkage
between realized compensation and the achievement of our key operational and strategic objectives;
• Monitoring our long-term incentive plans to achieve their objectives, which include 1) aligning the economic interest of our
executives with our shareholders; 2) creating significant incentives for retention; 3) encouraging long-term performance by our
executives; and 4) promoting stock ownership; and
• Maintaining target compensation levels for our Named Executive Officers that are competitive relative to the marketplace for
executives with comparable levels of responsibility.
Following the completion of our four-year transformation, the Company created significant momentum in our digital portfolio. Revenues
from digital businesses grew by double-digits for four consecutive quarters from the third quarter of 2007 through the second quarter of
2008. The revenue decline in our traditional businesses during the first half of 2008 was in line with our expectations.
As we entered the second half of 2008, the global recession broadened dramatically and began to negatively impact all of our businesses.
The global economic downturn is particularly challenging for the Company and other businesses in our industries that rely heavily on
consumer discretionary spending and business capital investment to fuel growth in revenue and profit. In addition, the heavy fourth quarter
seasonality of our consumer businesses coincided with the acceleration of the economic downturn. In response, the Company
aggressively implemented necessary actions to align the business with external realities.
Despite the economic downturn, we achieved most of our strategic business objectives in 2008, such as key product introductions, market
share maintenance or growth and effective cash management, all of which will help to position us well when the economy recovers. We did
not, however, achieve our key operational objectives, which were established prior to the deteriorating economic conditions that occurred
in the second half of the year. While the Committee felt the Company performed well leading up to the economic downturn, and responded
aggressively and appropriately to the downturn, it agreed with management’s recommendation that no payouts be made under our annual
variable pay or long-term equity incentive compensation plans in 2008. The Committee’s decision was consistent with our highly results-
oriented compensation strategy.