SkyWest Airlines 2013 Annual Report Download - page 142

Amount of 2013 Annual Bonus—The total annual bonus amounts payable to the Executives for
2013 were: Mr. Atkin—$247,763; Mr. Rich—$184,900; Mr. Childs—$211,601; Mr. Holt—$183,118 and
Mr. Kraupp—$81,603. Those amounts are included in the amounts shown in the Summary
Compensation Table below under the caption headings ‘‘Discretionary Bonus’’ and ‘‘Bonus and
Non-Equity Incentive Plan Compensation’’.
Long-Term Awards. The Company grants discretionary long-term incentive awards, in the form of
stock options, restricted stock units and performance units payable in cash to the Executives annually,
as evidenced by electronic and written award agreements.
Long-term incentive awards are made to encourage the Executives to continue their engagement
with the Company throughout the vesting periods of the awards and to align management and
shareholder interests. In making awards to the Executives, the grant size and the appropriate
combination of equity- based and deferred cash awards is considered. The Compensation Committee
generally grants long-term incentive awards at its first meeting of each year. Except in the case of
accelerated vesting upon a change in control of the Company, long-term incentive awards currently vest
only if the Executive remains employed by the Company for three years from the date of grant. The
Compensation Committee believes the three-year cliff-vesting schedule assists in retaining Executives
and encourages the Executives to focus on the Company’s long-term performance.
In granting stock options and restricted stock units to the Executives, the Compensation
Committee also considers the impact of the grant on the Company’s financial performance, as
determined in accordance with the requirements of Financial Accounting Standards Board Accounting
Standards Codification Topic 718 (ASC Topic 718). For long-term equity awards, the Company records
expense in accordance with ASC Topic 718. The amount of expense recorded pursuant to
ASC Topic 718 may vary from the corresponding compensation value used in determining the amount
of the awards.
Amount and allocation of grant—For 2013 the total annual targeted long-term incentive grant value
was 125% of salary and targeted annual bonus for Mr. Atkin, 100% of salary and targeted annual
bonus for Messrs. Rich, Childs and Holt and 70% of salary and targeted annual bonus for Mr. Kraupp.
The Compensation Committee established these targeted amounts to provide a competitive pay
package and to ensure that a large portion of each Executive’s compensation was based on continuing
long-term service and correlated to the creation of shareholder value. This has been the Compensation
Committee’s policy for several years, but is subject to review and continuation or modification each
year by the Compensation Committee. Mr. Atkin’s targeted level of long-term incentive awards is
higher than the targeted level of long-term incentive awards for other Executives since he has overall
responsibility for the long-term success of the Company. Each Executive’s 2013 long-term incentive
award was allocated among three types of long-term awards as follows: stock options, restricted stock
units and performance units payable in cash.
Three types of awards were used in an effort to link the Executives’ long-term incentive
compensation with the creation of shareholder value. The value of stock options and restricted stock
units is directly related to the value of the Common Stock. The Executives earn performance units
payable in cash by achieving specified levels of pretax earnings that the Compensation Committee
believes also lead to long-term shareholder value, but are not subject to short-term stock market
volatility.
Stock options, restricted stock unit and performance unit grants in 2013 were made pursuant to
the Company’s 2010 Plan, as shown in greater detail below in the table labeled ‘‘Grants of Plan Based
Awards.’’
Stock Options—Options are granted with an exercise price equal to the closing price per share on
the date of grant and vest three years after the date of grant. Grants are made on a systematic
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