Alaska Airlines and Horizon Air 2014 Annual Report Download - page 30

Alaska Air Group governance practices ranked
among the best by ISS
As of the printing of this proxy statement, Alaska
Air Group maintains a governance rating of “1”
from Institutional Shareholder Services (ISS),
which is the highest ranking possible.
Additional information
In considering how to vote on the proposal, it is
important to note that the proponent has made
several assertions that are false or misleading.
The assertions are not directly related to the
proposal to require an independent chairman,
and they are addressed here in the interest of
providing full information to investors.
• The proponent correctly cites the fact that
five directors serving on the Board as of
November 2, 2014 have tenures of 10 years
or more, and the Board wishes to provide the
following context:
The Board has added five independent
directors over the past five years, and two
long-tenured directors stepped down in 2014,
resulting in an average tenure of seven years
among the Company’s ten independent
directors. The Board has a 15-year maximum
term limit for directors elected since 2012 in
order to ensure fresh perspectives on the
Board. The Board values the experience of its
directors and views a diversity of tenure as an
asset that compromises neither directors’
independence nor their ability to oversee the
CEO.
• The proponent incorrectly states that five
long-tenured directors (as of November 2,
2014) “controlled 87% of the votes on our
three most important board committees.”
As a result of the board refreshment
described above, the average tenures of
directors on board committees has also
declined. The average tenure of directors on
the Audit Committee, the Compensation and
Leadership Development Committee, and the
Governance and Nominating Committee is six
years, nine years and 12 years, respectively.
• The proponent incorrectly states that Alaska
Air Group reported a $120 million “charge”
related to its Bank of America credit card
agreement.
In connection with modifications to Alaska
Airlines’ affinity card agreement with Bank of
America in July 2013, the Company recorded
a one-time, favorable “special” revenue item
of $192 million pre-tax ($120 million post-
tax) in the third quarter of 2013. The Board
refers interested investors to pages 9-10 of
the Company’s report on Form 10-Q for the
quarter ended September 30, 2013, for
additional information on this accounting
matter.
• The proponent imprecisely states that
“Alaska Air did $2.7 million of business with
Helvi Sandvik’s company.”
As disclosed in this Proxy Statement, Alaska
Airlines purchased $3 million in services from
an entity in which NANA Development
Corporation holds a 51% interest. Director
Helvi Sandvik is the president of NANA
Development Corporation and has no direct
material interest in the reported transactions.
Accordingly, the Board affirmed her
independence in light of SEC, NYSE and the
Company’s independence standards.
• The proponent asserts that the CEO receives
excessive perquisites and pension benefits.
In 2014, the Compensation and Leadership
Development Committee decided to phase
out the CEO’s and other executives’
perquisite allowances over a three-year
period. With respect to pension benefits, the
Retirement Plan for Salaried Employees and
the Company’s 401(k) plans are tax-qualified
retirement plans in which the CEO
participates on substantially the same terms
as other participating employees. Federal law
limits the amount that may be paid to
executives under a tax-qualified retirement
plan, meaning that pension benefits that
would otherwise be provided to the CEO are
required to be limited. The CEO receives
make-up retirement benefits through an
18 PROPOSALS TO BE VOTED ON