SkyWest Airlines 2014 Annual Report Download - page 146

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 2014 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. Childs, Steel, Rich, Thompson and Holt and 70% of salary and targeted annual
bonus for Mr. Kraupp. Messrs. Steel and Thompson’s targeted long-term incentive grant value were
awarded at 70% of salary and targeted annual bonus through their May 2014 appointment as executive
officers of the Company and SkyWest Airlines, respectively and at 100% of salary and targeted annual
bonus following those appointments. The Compensation Committee established these annual 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 2014 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.
In addition to the total annual targeted long-term incentive grant value, the Compensation
Committee issued a discretionary long-term incentive grant value comprised of stock options to
Messrs. Atkin, Rich, and Kraupp having grant date values of $60,000, $60,000 and $26,000, respectively.
Those discretionary stock option grants were made in recognition of their efforts to address unique
challenges attributable to ExpressJet’s operations, including reimbursement rates payable under
ExpressJet’s contracts with its major partners and maintenance costs associated with ExpressJet’s aging
fleet. Messrs. Childs, Steel, Thompson and Holt did not receive a discretionary long-term incentive
grant.
Three types of long term incentive 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
stock market volatility.
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