Alaska Airlines and Horizon Air 2014 Annual Report Download - page 50

• The Company has executive and independent
director stock ownership requirements.
• An anti-pledging and anti-hedging policy is in
place.
• The Company has no executive employment
agreements with the Named Executive
Officers.
Consideration of Say-on-Pay Advisory Vote
At the May 2014 annual meeting, 97% of the
votes were cast in favor of the advisory say-on-
pay proposal in connection with the Company’s
2013 compensation. The Committee believes
that the vote indicates that most stockholders
approve of the structure of executive
compensation at Alaska Air Group. Therefore, the
Committee structured executive compensation
for 2014 in a way that is generally consistent
with that of 2013. Stockholders have an
opportunity annually to cast an advisory vote in
connection with executive compensation.
2014 Compensation Program Overview
The Company’s executive compensation program
is designed to compensate executives
appropriately and competitively and to drive
superior performance. Because the Named
Executive Officers are primarily responsible for
the overall execution of the Company’s strategy,
a high percentage of their total direct
compensation is variable and tied to Company
performance, thereby providing incentives to
achieve goals that help create value for
stockholders. Highlights of the program, which
did not change materially from 2013, follow.
• For 2014, the Committee approved target-
level total compensation for Mr. Tilden that is
79% performance-based and aligned with
stockholder value creation. With respect to
the other Named Executive Officers, the
Committee approved target total
compensation that is, on average, 71%
performance-based and aligned with
stockholder value creation.
• Executives’ bonuses under the Company’s
annual incentive pay program, in which all
Company employees participate, are based
on the achievement of specific performance
objectives that are established at the
beginning of the fiscal year by the Committee
and are capped at a specified maximum
amount. As illustrated in the 2014
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, operational
and customer satisfaction scores.
• Executives’ equity incentive awards generally
consist of a combination of stock options,
service-based restricted stock unit awards,
and performance stock unit awards that vest
only if specified performance levels of relative
total shareholder return (TSR) are achieved.
The performance stock units have a three-
year performance period that is based 50%
on shareholder return relative to an airline
industry peer group and 50% relative to the
Standard and Poor’s 500 Index. These
awards align an executive’s opportunity with
the creation of value for stockholders.
Objectives of the Company’s Executive Compensation Program
The objectives of the executive compensation
program are as follows:
•to attract and retain highly qualified
executives who share the Company’s values
and are committed 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
38 EXECUTIVE COMPENSATION