LeapFrog 2011 Annual Report Download - page 144

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• Maintain unvested equity value as a percent of salary at a sufficient level to provide a significant
retention motivation;
• Target the key elements of executive compensation (base salary, annual bonus opportunity, and
equity incentive awards) to provide total compensation packages for our executives individually and
as a group at approximately the 50th percentile of similarly situated companies;
• Provide flexibility such that target compensation for individual executives may vary above or below
the median based on a variety of factors, such as the executive’s skill set relative to his or her peers,
experience and time in the executive’s position, the importance of the executive’s role to us, the
difficulty of replacement, the executive’s performance and internal pay equity considerations; and
• Ensure our compensation plans and arrangements avoid incentives that might lead to excessive
risk-taking.
Executive Compensation Decisions
Role of Compensation Committee and Management
Our compensation committee is responsible for the design, implementation, and oversight of our
executive compensation program. Generally, our CEO, CFO and the Vice President of Human Resources and
Organizational Development make recommendations to the compensation committee regarding the short-term
and long-term compensation for our named executive officers (other than with respect to compensation of our
CEO). These recommendations are based on their assessment of our financial and operational results, each
executive’s contribution to these results, the executive’s progress toward achieving his or her individual goals,
and input from our Human Resources Department regarding internal pay equity and the compensation
consultant retained by the compensation committee to provide information on competitive market practices.
The compensation committee’s decisions regarding our CEO’s compensation are based on its assessment of
our financial and operational results, his contributions to these results, and, to a lesser extent, his progress
toward achieving his individual goals, and information on competitive market practices.
The authority to approve equity awards for our named executive officers has been delegated to the
performance compensation award subcommittee of the compensation committee. For more information about
the performance compensation award subcommittee, including its membership and functions, see ‘‘Board of
Directors and Corporate Governance — Committees of the Board — Compensation Committee’’ above.
Role of Compensation Consultant
The compensation committee has engaged Compensia, Inc., or Compensia, a national compensation
consulting firm, to provide advice and guidance on our executive compensation policies and practices and to
provide relevant information about the executive compensation practices of similarly situated companies.
Compensia assists in the preparation of compensation materials on executive compensation proposals in
advance of compensation committee meetings, including changes to compensation levels for our executives,
the design of our equity programs and other executive benefit programs. In addition, Compensia reviews and
advises the compensation committee on compensation materials relating to executive compensation prepared
by management for its consideration.
In addition, Compensia, under the direction of the compensation committee, conducts an annual review
of the competitiveness of our executive compensation program, including base salaries, annual bonus
opportunities, equity awards, and other executive benefits, by analyzing the compensation practices of the
companies in our compensation peer group (as described below), as well as data from third-party
compensation surveys. The compensation committee uses the results of this analysis to assess the
competitiveness and risks of our executives’ total compensation packages.
Use of Competitive Data
To monitor the competitiveness of our executives’ compensation, the compensation committee uses a
compensation peer group that reflects the pay of executives in comparable positions at similarly situated
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