iRobot 2014 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2014 iRobot annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

28
Clawback
In 2015, the Company adopted a clawback policy that provides the board of directors has discretion to reduce the amount of
future compensation payable to an executive of the Company for excess proceeds from incentive compensation received by such
executive due to a material restatement of financial statements. The clawback period is the three-year period following the filing
of any such restated financial statements with the Securities and Exchange Commission (the “SEC”).
Tax Deductibility of Executive Compensation
In general, under Section 162(m) of the Code, we cannot deduct, for federal income tax purposes, compensation in excess of
$1,000,000 paid to certain executive officers. This deduction limitation does not apply, however, to compensation that constitutes
“qualified performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. We have considered the limitations on deductions imposed by Section 162(m) of the Code and it is our present
intention, for so long as it is consistent with our overall compensation objective, to structure executive compensation to minimize
application of the deduction limitations of Section 162(m) of the Code, while also maintaining the flexibility to pay compensation
that is subject to the deduction limitations imposed by Section 162(m) of the Code.
Risk Oversight of Compensation Programs
The compensation committee annually reviews and believes our compensation program for executive officers is not
structured to be reasonably likely to present a material adverse risk to us based on the following factors:
• Our compensation program for executive officers is designed to provide a balanced mix of cash and equity and annual
and longer-term incentives, including compensation based on the achievement of performance targets.
• The base salary portion of compensation is designed to provide a steady income regardless of our stock price
performance so executives do not feel pressured to focus primarily on stock price performance to the detriment of other
important business metrics.
• Our stock option grants and restricted stock unit grants generally vest over four years and, in the case of stock options,
are only valuable if our stock price increases over time.
• Our performance share units vest only after the achievement of significant long-term metrics designed to drive the long-
term interests of our stockholders.
• Performance share unit awards align the interests of our executive officers with the success of our business strategy.
• Maximum payout levels for cash incentive compensation are capped.
• Our stock ownership guidelines align the interests of our executive officers with those of our stockholders.
Compensation Consultant Independence
Pursuant to its charter, the compensation committee has the sole authority to retain, terminate, obtain advice from, oversee
and compensate its outside advisors, including its compensation consultant.
In 2013 in preparation for the 2014 fiscal year, the compensation committee retained PM&P as its independent executive
compensation consultant. None of our management team participated in the compensation committee's decision to retain PM&P.
PM&P reports directly to the compensation committee, and the compensation committee may replace PM&P or hire additional
consultants at any time. PM&P attends meetings of the compensation committee, as requested, and communicates with the
chairman of the compensation committee between meetings; however, the committee makes all decisions regarding the
compensation of the Company's executive officers.
PM&P provides various executive compensation services to the compensation committee with respect to our executive
officers and other key employees at the compensation committee's request. The services PM&P provides include advising the
compensation committee on the principal aspects of the executive compensation program and evolving best practices, and
providing market information and analysis regarding the competitiveness of our program design and awards in relationship to our
performance.
The compensation committee reviews the services provided by its outside consultants and believes PM&P is independent in
providing executive compensation consulting services. The compensation committee conducted a specific review of its
relationship with PM&P in 2014, and determined PM&P's work for the compensation committee did not raise any conflicts of
interest, consistent with the guidance provided under the Dodd-Frank Act and by the SEC and NASDAQ. In making this
determination, the compensation committee noted the following during 2014: