TripAdvisor 2012 Annual Report Download - page 159

After consideration of the factors discussed above, the Compensation Committees awarded 2012 cash
bonuses to the named executive officers as follows: Mr. Kaufer, $750,000, Ms. Bradley, $250,000, and
Mr. Kalvert, $205,000. No bonus was awarded to Mr. Diller for 2012.
After consideration of the factors discussed above, the Compensation Committees decided to maintain
Mr. Kaufer’s 2013 target cash bonus at 100%. With respect to Ms. Bradley and Mr. Kalvert, the Compensation
Committees decided to maintain their 2013 target bonus amounts at 66% and 50%, respectively, which is
consistent with the terms of their respective employment agreements.
The annual cash bonuses awarded to the named executive officers for 2012 were subject to the achievement
of performance goals relating either to stock price performance or revenues, which were satisfied. These
performance goals were designed to permit TripAdvisor to deduct all named executive officer compensation for
2012 in accordance with Section 162(m) of the Code. Specifically, the cash bonuses awarded to named executive
officers in 2012 were subject to the satisfaction of one of the following performance goals:
• The revenues of TripAdvisor in any of the three consecutive calendar quarters beginning with the second
quarter of 2012 must be at least 10% higher than the revenues in the corresponding calendar quarter
12 months before, excluding the benefit of any acquisitions by TripAdvisor during this period.
• On at least 30 trading days during the period beginning on March 23, 2012 through December 31, 2012,
the closing price per share of TripAdvisor common stock must exceed at least 5% of the closing price of
TripAdvisor’s common stock on March 22, 2012, which was $33.25, taking into account any Share
Change or Corporate Transaction (each as defined in the 2011 Plan).
In general these performance goals reflect the minimally acceptable Company performance that must be
achieved in order for any amount of cash bonuses to be awarded to the named executive officers, but with respect
to which there is substantial uncertainty when established. Based on data provided by management, the
Compensation Committees exercise negative discretion in setting payouts under the annual incentive plan. By
setting a high amount that can be reduced, TripAdvisor is advised by legal counsel that TripAdvisor’s annual
incentive plan meets the requirements of Section 162(m) of the Code. As a result, while performance targets are
utilized in setting compensation under this plan, ultimately the levels of those targets and the Compensation
Committees’ use of negative discretion typically result in the award of compensation as if the annual incentive
plan were operating as a discretionary plan.
These cash bonuses are reflected in the “Bonus” column of the table below titled “2012 Summary
Compensation Table.”
Equity Compensation
The Compensation Committees use equity compensation to align executive compensation with our long-
term performance. Equity compensation awards link compensation to financial performance because the value of
equity awards depends on TripAdvisor’s share price. Equity compensation awards are also an important
employee retention tool because they generally vest over a multi-year period, subject to continued service by the
award recipient. For 2012, the Compensation Committees granted equity awards to our named executive officers
(other than Mr. Diller who received a grant of RSUs only in connection with his service as a director) in the form
of stock options and expects to continue that practice going forward.
Equity awards are typically granted to executive officers upon hire or promotion and annually thereafter.
Management generally recommends annual equity awards in the first quarter of each year when the
Compensation Committees meet to make determinations regarding annual bonuses for the last completed fiscal
year and to set compensation levels for the current fiscal year. The practice of the Compensation Committee is to
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