Alaska Airlines and Horizon Air 2012 Annual Report Download - page 56

EXECUTIVE COMPENSATION
a specified maximum amount. As
illustrated in the “2012 Performance-
Based Pay Calculation” table, the annual
incentive plan paid out above target this
year primarily as a result of record
profitability and excellent safety and
customer satisfaction scores.
• Executives’ equity incentive awards
generally consist of a combination of
stock options, time-based restricted
stock unit awards, and restricted stock
unit awards that vest only if specified
performance levels are achieved. For
2010 and 2011, annual performance-
based awards vest based on the
Company’s total shareholder return
relative to that of a peer group of
companies. For 2012, the vesting of
these awards is based 50% on
shareholder return relative to a peer
group and 50% relative to the Standard
and Poors 500 Index. Tying these
rewards to total stockholder return
ensures that an executive’s opportunity
to benefit under the award is directly
linked to the creation of value for
stockholders. To further enhance the link
between the interests of executives and
stockholders, all of the Company’s
elected officers are expected to hold, at
a minimum, a specified level of Company
stock as set forth in the Company’s
stock ownership policy. As of the record
date, Mr. Tilden held Company stock
valued at more than ten times his annual
salary, exceeding the holding
requirement set in the stock ownership
policy.
The Compensation and Leadership
Development Committee has reviewed its
compensation programs for executives and
for non-executives and believes that
compensation is structured in a way that
does not create risks that would be
reasonably likely to have a material, adverse
effect on the Company.
Objectives of our Executive Compensation
Program
The objectives of the executive
compensation programs, as determined by
the Alaska Air Group Board Compensation
and Leadership Development Committee,
are as follows:
•to attract and retain highly qualified
executives who share the Company’s
values and commitment to its strategic
plan by designing the total compensation
package to be competitive with an
appropriate peer group;
•to motivate executives to provide
excellent leadership and achieve
Company goals by linking incentive pay
to the achievement of specific targets
that are reflected in the short-term
incentive Performance-Based Pay Plan
and the Company’s strategic plan;
•to align the interests of executives,
employees, and stockholders by tying a
large portion of our executives’ total
direct compensation (defined as base
salary, short-term incentive pay and
equity awards) to the achievement of
objective goals related to the Company’s
financial performance, safety record,
cost structure, and customer
satisfaction; and
•to provide executives with reasonable
security to motivate them to continue
employment with the Company and
achieve goals that will help the Company
remain competitive and thrive for the
long term.
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