Sunoco 2014 Annual Report Download - page 117

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Elements of Compensation
Unless specified to the contrary below, references in this section of the CD&A to "NEOs" or "executive officers" does not
include Mr. Salinas.
• Base Salary: Base salary is designed to provide for a competitive fixed level of pay that attracts and retains executive
officers, and compensates them for their level of responsibility and sustained individual performance (including
experience, scope of responsibility, and results achieved). The salaries of the NEOs are reviewed on an annual basis.
As discussed above, the base salaries of the NEOs are targeted to yield an annual base salary slightly below median
level of market (i.e., approximately the fortieth percentile of market) and are determined by the Compensation
Committee after taking into account the recommendations of our Chief Executive Officer. Base salaries also are
influenced by internal pay equity (fair and consistent application of compensation practices). At the NEO level, the
balance of compensation is weighted toward pay-at-risk compensation (annual bonuses and long-term incentives).
Except for the salary of the Chief Executive Officer, the Compensation Committee approved annual 2.5 percent merit
increases to the NEOs salaries, effective July 1, 2014, which salaries are expected to remain in effect until July 1,
2015. The Compensation Committee increased the salary of the Chief Executive Officer to $600,000 effective January
1, 2014 from its previous level of $574,750, or an approximately 4.4 percent increase.
• Annual Bonuses: In addition to base salary, the Compensation Committee makes a determination whether to award our
NEOs discretionary annual cash bonuses following the end of the year. Discretionary bonuses, if awarded, are
intended to reward our NEOs for the achievement of financial performance objectives during the year for which the
bonuses are awarded in light of the contribution of each individual to our profitability and success during such year. In
previous years, the Compensation Committee has taken into account whether the Partnership achieved or exceeded its
targeted performance objectives, which are approved by the Board as discussed below, as an important element in
making its determinations with respect to annual bonuses. The Compensation Committee does not establish its own
financial performance objectives in advance for purposes of determining whether to approve any annual bonuses, and
the Compensation Committee does not utilize any formulaic approach to determine annual bonuses.
For 2014, annual bonuses were determined under the Sunoco Partners LLC Amended and Restated Annual
Short-Term Incentive Bonus Plan (the "Restated ASIP"), which replaced the Sunoco Partners LLC Annual Short-Term
Incentive Bonus Plan (the "ASIP") during such year. The Restated ASIP, which became effective for calendar year
2014, is substantially similar to the ASIP, except that the Restated ASIP includes an additional performance criteria
related to the Partnership's internal department financial budget in addition to the previous performance measure of an
internal earnings target generally based on targeted EBITDA (the "Earnings Target") budget. Under the Restated ASIP,
the Compensation Committee's evaluation of performance and determination of an overall available bonus pool will
be based on the Partnership's Earnings Target and the performance of each department compared to the applicable
departmental budget (with such performance measured based on the specific dollar amount of general and
administrative expenses set for each department). The two performance criteria will be weighted 75 percent on
internal Earnings Target budget criteria and 25 percent on internal department financial budget criteria.
In adopting the Restated ASIP, the Board and the Compensation Committee have reaffirmed the internal
Earnings Target as the primary performance factor in determining annual bonuses. The addition of the internal
department financial budget criteria is designed to ensure that the Partnership is effectively managing general and
administrative costs in a prudent manner.
The Partnership's internal financial budgets are generally developed for each business segment, and then
aggregated with appropriate corporate level adjustments, to reflect an overall performance objective that is reasonable
in light of market conditions and opportunities based on a high level of effort and dedication across all segments of the
Partnership's business. The evaluation of the Partnership's performance versus its internal financial budget is based on
the Partnership's Earnings Target for a calendar year. In general, the Compensation Committee believes that
Partnership performance at or above the internal Earnings Target budget and at or below internal department financial
budgets would support an eligible bonus pool for our NEOs ranging from 95 to 120 percent of their annual base
salaries for Messrs. Lauterbach and Chalson and ranging from 75 to 100 percent of her base salary for Ms. Shea-
Ballay. The short-term annual cash bonus pool target for Mr. Hennigan was set by the Compensation Committee for
2014 at 135 percent of his annual base salary.
In February 2015, in respect of 2014 performance under the Restated ASIP, the Compensation Committee
approved a cash bonus to Mr. Hennigan of $810,000, representing 135 percent of his current annual base salary. The
cash bonuses approved for Messrs. Lauterbach and Chalson were $300,000 and $300,000, respectively, and Ms. Shea-
Ballay received a cash bonus of $300,000. In approving the 2014 bonuses of the NEOs, the Compensation Committee
took into account the achievement by the Partnership of all of its targeted performance objectives for 2014 and the
individual performances of these individuals with respect to (i) promoting the Partnership's financial, strategic and
operating objectives, (ii) the Partnership's success in exceeding its internal financial budget, (iii) the development of