SkyWest Airlines 2014 Annual Report Download - page 147

Stock options, restricted stock unit and performance unit grants in 2014 were made pursuant to
the Company’s 2010 Plan, as shown in greater detail below and in the table labeled ‘‘Grants of Plan
Based Awards.’’
The following table summarizes the number and nature of long-term awards granted to the
Executives by the Company on February 18, 2014 and May 15, 2014 under the 2010 Plan.
Time Vested LTI Performance-Contingent LTI
Shares/Stock Shares/Stock Other Units
Options Units Options Units (Cash)(1)
Jerry C. Atkin ........................ 50,570 27,354 — — $472,828
Russell A. Childs ...................... 22,741 17,504 — — $302,573
Wade J. Steel ......................... 11,488 8,843 — — $152,852
Bradford R. Rich ...................... 36,353 16,411 — — $283,680
Michael B. Thompson .................. 10,919 8,404 — — $145,274
Bradford R. Holt ...................... 17,614 13,558 — — $234,360
Michael J. Kraupp ..................... 14,275 5,974 — — $103,264
(1) Number of performance units if 100% of target achieved. See the table and discussion below for
information regarding the performance units actually earned for 2014.
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
schedule, generally one grant per year made at the first Compensation Committee meeting of each
year.
The purpose of stock options is to tie a significant percentage of the award’s ultimate value to
increases in the market price of the Common Stock, thereby rewarding increased value to the
shareholders. A stock option only has a value to the extent the value of the underlying shares on the
exercise date exceeds the exercise price. Accordingly, stock options provide compensation only if the
underlying share price increases over the option term and the Executive’s employment continues
through the vesting date.
The size of the grant for each Executive is calculated by determining the number of shares with a
theoretical future value equal to the targeted compensation for stock options, assuming each option will
have a value equal to 33% of its exercise price. This value generally correlates to the ASC Topic 718
value of the awards. The targeted stock option allocation of each Executive’s aggregate, targeted level
of long-term incentive compensation for 2014 was 15%.
Restricted Stock Units—The Company also granted restricted stock units to the Executives in 2014
under the 2010 Plan. The restricted stock units awarded to an Executive entitle the Executive to receive
a designated number of shares of Common Stock upon completion of a three-year vesting period,
measured from the date of grant. Until the vesting date the shares underlying restricted stock units are
not issued and outstanding. Accordingly, the Executive is not entitled to vote or receive dividends on
the shares underlying his restricted stock units unless and until those restricted stock units vest. The
purpose of the restricted stock unit component is to support continued employment through volatile
economic and stock market conditions, to manage dilution overhang, and to align officers’ interests
with maintaining shareholder value already created. The Compensation Committee believes this
approach mitigates the incentive for Executives to take unnecessary risks and helps retain the
Executives’ expertise through continued employment. Recipients of restricted stock units do not pay for
the underlying shares once the awards vest; however they must remain employed by the Company for
three years to receive the underlying shares. Restricted stock unit awards provide the Executives with
an indirect ownership stake in the Company and encourage the Executives to continue employment in
30