Logitech 2012 Annual Report Download - page 126

ELEMENTS OF COMPENSATION
The principal components of our executive compensation programs are:
• Base salary.
• Performance-based cash compensation, in the form of annual incentive cash payments.
• Long-term equity incentive awards, which in fiscal year 2012 consisted of performance-based stock
units and time-based restricted stock units.
Our executive officers are also eligible to participate in our health and benefits plans, retirement savings
plans, and our employee share purchase plans, which are generally available to our employees. We also provide
limited perquisites, as described in “Other Compensation Elements – Perquisites” below.
The following table outlines our objectives for each of the principal components of executive compensation.
Element of Compensation Objective
Base salary •Reward individuals for their current contributions to the Company
•Compensate individuals for their expected day-to-day service
Performance-based cash compensation •Align executive compensation with Logitech’s annual
performance goals
•Make a significant portion of the executive’s annual cash
compensation variable and subject to the achievement of Board-
approved, Company-oriented business goals
•Motivate and reward the executive for above-target performance
Long-term equity incentive awards •Deliver the majority of total potential compensation via long-term
equity incentives
•Align executive and shareholder interests
•Provide a direct incentive for future performance
•Support retention of the executive
Pay Mix
In determining how we allocate an executive’s total compensation package among base salary, performance-
based cash compensation and long-term equity incentives, we emphasize compensation elements that reward
performance against measures that correlate closely with increases in shareholder value. Accordingly, the majority
of our executive compensation is at- risk, including the annual performance-based cash bonus and the majority of
our long-term equity incentive grants. Our CEO and other executive officers have a higher percentage of at-risk
compensation (and thus greater upside potential and downside risk) relative to Logitech’s other employees.
The charts below indicate the percentage of total compensation costs in fiscal year 2012 represented by base
salary, performance-based cash compensation, and long-term equity incentive awards for our Chief Executive
Officer, Guerrino De Luca, and for all other named executive officers who remained executive officers through
fiscal year 2012. All underlying amounts are taken from the Summary Compensation Table on page 136.
We design our programs to have the largest portion of potential compensation to be based on long-term
performance (equity), the next largest portion based on short-term performance (annual performance bonus), and
the smallest portion as regular salary. While the fiscal year 2012 pay mix does not appear to reflect this design
philosophy, with executive officers receiving almost half of their annual compensation in base salary and the other
half in equity, it should be noted that the executive officers received only 65% to 75% of their target compensation
for the year. This reflects the impact of: (1) not meeting internal expectations (Board-approved financial targets)
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