Tech Data 2013 Annual Report Download - page 112

Table of Contents
compensation must be reasonable and controlled with a target near the median market rate for executive compensation in our peer group.
Our compensation program comprises three fundamental elements that correspond to the various aspects of an executive’s responsibilities: (1) base
salary for day-to-day responsibilities, (2) an annual cash incentive bonus (“bonus”) opportunity for short-term returns directly linked to specified
Company and regional performance measures, and (3) equity awards for aligning the executive’s focus with shareholder value creation and the
longer-term performance of the Company. In this section, we use the term “targeted total cash compensation”
to refer to base salary plus bonus (at a
presumed target 100% payout) and we use the term “targeted total direct compensation” to refer to targeted total cash compensation plus equity
awards.
Pay-for-performance is reflected in our selection of the performance measures for annual bonus awards and in our consistent use of those
performance measures. Since fiscal 2009, the Company has used the following performance measures for our NEO annual bonuses: earnings per
share (“EPS”), return on invested capital (“ROIC”, previously referred to as return on capital employed or “ROCE”), and regional profitability
(operating income for the Americas and contribution margin for Europe) measured in dollars or euros and as a percentage of sales. We believe that
these measures best drive performance and deliver shareholder value. Although the Committee periodically analyzes the appropriateness of the
performance measures on which bonuses depend, it has concluded that consistently applying the same performance measures over defined
timeframes fosters a culture in which the importance of these measures is appropriately valued, clearly understood and disseminated throughout the
organization.
The Company’s shareholders have expressed overwhelming support for our executive compensation program. At the Company’s most recent
Annual Meeting, held on May 30, 2012, approximately 35,979,000 votes were cast in favor of the non-binding proposal to approve the
compensation paid to our NEOs for fiscal 2012 (the “Say-on-Pay Proposal”) and only 1,471,000 votes were cast against the proposal. In addition,
ISS and Glass-Lewis both recommended that shareholders vote “FOR” the Company’s fiscal 2012 Say-On-Pay Proposal. The Company and the
Committee have considered this strong shareholder support, and positive recommendations from ISS and Glass-Lewis, in continuing our NEO
compensation program largely unchanged from fiscal 2012.
Following are key aspects of the Company’s fiscal 2013 NEO compensation and notable compensation decisions made following the end of our
2013 fiscal year:
100
•
Program continuity:
The Company continued to implement the same overall compensation philosophy and program in fiscal 2013 that
has driven success in recent years. Programs associated with base salaries, bonus as a percentage of base, and equity awards as a
percentage of targeted total cash compensation all remained largely unchanged. Further, NEO bonuses were based on the same
performance measures as in fiscal 2012 and there were no changes to NEO bonus acceleration or deceleration tables. Although there
were some carefully tailored adjustments to specific compensation elements for particular NEOs, as discussed below, the Company’s
fiscal 2013 NEO compensation program remained consistent with the fiscal 2012 program endorsed by our shareholders at the last
Annual Meeting.
•
Modest salary increases.
Each NEO other than Mr. Wright and Mr. Tonnison received a common merit increase (“CMI”) in base
salary of between 2.5% and 3.5%. These changes were made to maintain alignment with our peer group median and remain
competitive in the marketplace, and to recognize the contributions each executive made to our business during fiscal 2012. Mr. Wright
and Mr. Tonnison each received a larger base salary increase of 10.0% to bring their targeted total direct compensation closer to the
peer group median.
• One-time retention equity awards to Mr. Wright and Mr. Tonnison . Mr. Wright and Mr. Tonnison each received a special one-time
equity grant of RSU’s with a grant date value of approximately $250,000 for retention purposes (a “Retention Equity Award”). The
three-year vesting period and other terms and conditions of the Retention Equity Awards were identical to the annual equity grants
made to all NEOs in fiscal 2013.
•
Bonus payouts and total direct compensation were lower in fiscal 2013
. The Company’s results for fiscal 2013, including net income
attributable to the Company’s shareholders on a non-
GAAP basis, were lower than expected as the result of a variety of factors. These
factors included the market’s rapid shift away from higher-margin products such as servers, to lower-margin products such as tablets,
mobile phones and software, as well as a shift in vendor concentration. In addition, the implementation of certain modules of the
Company’s SAP system in the U.S. caused the Company to lose some market share. These challenges were reflected in lower
achievement on the various applicable performance measures, and resulted in bonus payout levels of between 69% and 78% of target.
Because the bonus is such a significant part of total direct compensation, this reduction in bonus payouts resulted in a corresponding
reduction in total direct compensation for all NEOs except for Mr. Wright and Mr. Tonnison, whose total direct compensation as
reflected in the Summary Compensation Table increased as a result of the inclusion of the grant date value of the Retention Equity
Award each received. The direct tie between Company results, bonus payouts, and total direct compensation reflects the Company’s
commitment to pay-for-performance.