XM Radio 2013 Annual Report Download - page 33

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program is structured to meet the requirements of the intensely competitive and rapidly changing environment in
which we operate, while ensuring that we maintain continuity in our senior management, and that the named
executive officers are compensated in a manner that advances both the short- and long-term interests of our
stockholders and avoids unnecessary or excessive risk-taking.
A high proportion of the compensation for our named executives officers also involves pay that is “at
risk” — namely, the annual bonus and equity-based awards. The Compensation Committee uses “at risk”
compensation to motivate the named executive officers to achieve goals and objectives that support our business
plan and align our executives’ interests with those of our stockholders. The Compensation Committee further
believes that delivering compensation in the form of, or based on the value of, our common stock promotes
alignment between executive performance and stockholder interests. Accordingly, the value of equity-based
compensation represents a large portion of our executives’ total compensation, including through grants of
equity-based awards.
Processes and Compensation Decisions
The Compensation Committee regularly reviews our practices to assess whether our existing compensation
structure properly enhances stockholder value. In 2013, the Compensation Committee received advice from an
independent compensation consultant regarding trends in general compensation practices, including trends in
equity-based awards. The members of the Compensation Committee also relied on their significant experience,
general industry knowledge and informed judgment in making compensation decisions as to our named executive
officers’ base salaries, annual bonuses and equity-based awards.
The Compensation Committee does not attempt to set compensation levels for each named executive officer
within a particular range related to levels provided by peers. The Compensation Committee relies on the general
business and industry knowledge and experience of its members and occasionally uses informal market
comparisons as one of many factors in making compensation decisions. Other factors considered when making
individual executive compensation decisions include individual contribution and performance, reporting
structure, historical compensation, internal pay equity, complexity and importance of roles and responsibilities,
expected future contributions, leadership and growth potential and our performance. The Compensation
Committee also believes that it is in our stockholders’ interests, and consistent with industry practice, to enter
into arrangements with our named executive officers in order to provide stability for our senior executives.
Further, any compensation or equity awards provided to the named executive officers are subject to clawback as
may be required pursuant to any law or regulation.
In determining compensation element levels, including the annual grants of equity-based awards, if any, for
each named executive officer (other than the Chief Executive Officer), the Compensation Committee also
consults with and considers the recommendations and input of our Chief Executive Officer.
Total Compensation for Named Executive Officers
The Compensation Committee’s goal is to award compensation that incentivizes our named executive
officers to enhance value for our stockholders without encouraging the taking of inappropriate business risks, and
is not considered excessive when all elements of potential compensation are considered. In making decisions
with respect to any single element of a named executive officer’s compensation, the Compensation Committee
considers the officer’s level of responsibility, experience and contributions, internal pay equity and the total
compensation that may be awarded to the officer, including salary, annual bonus, long-term incentives,
perquisites and other benefits. In addition, the Compensation Committee considers the other benefits to which the
officer is entitled under his employment agreement, including compensation payable upon termination of
employment. (Each named executive officers is employed pursuant to agreements described under “Potential
Payments upon Termination or Change-in-Control — Employment Agreements” below.)
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