Autodesk 2007 Annual Report Download - page 31

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Proxy Materials
Under the EIP, target awards are established for each eligible participant. Each year, a corporate
financial performance matrix is developed at the beginning of the award period. This matrix
provides a guide to determining appropriate award levels based on varying levels of achievement
of operating margin and revenue growth. A participant may receive an actual bonus that is larger
or smaller than the target incentive payout, or may receive no bonus whatsoever. The actual
award reflects a combination of the target award, the Company’s revenue and operating margin
performance, and an assessment of the individual’s performance during the year.
• Participants
Five employees were originally designated to participate for fiscal 2007, all of whom are Named
Executive Officers. When Carol A. Bartz entered into a new employment agreement in January
2007, she voluntarily agreed to receive no EIP award for fiscal 2007 and will not participate in
the future. The remaining participants in the EIP for fiscal 2007 were the current Chief Executive
Officer Carl Bass, Chief Financial Officer Alfred J. Castino, Sales Executive George M. Bado, and
Human Resources Executive Jan Becker.
• Target Awards
For each participant, the Committee established an EIP target award equal to a percentage of
base salary as follows: Carl Bass 100 percent, Alfred J. Castino 75 percent, Jan Becker 75 percent,
and George M. Bado 16.7 percent. As leader of the sales organization, George M. Bado has
additional cash incentive compensation tied to sales commissions. His sales commission target is
50 percent of his base salary.
• Corporate Income Tax Considerations
The EIP is intended to qualify as deductible “performance-based” compensation within the
meaning of Section 162(m) of the Internal Revenue Code and has been structured accordingly.
The structure of the plan separates the funding of the awards from the determination of the
actual awards, as described below.
• Maximum Funding of Pool for Awards
At the beginning of the award period, the Committee determines a payout funding formula
that provides for a maximum funding amount based on a minimum threshold of revenue growth
and a non-GAAP operating margin attainment. The non-GAAP operating margin for fiscal 2007
excluded certain costs, expenses, gains and losses, including stock based compensation expense,
amortization of purchased intangibles and litigation expenses. Below this threshold, there is no
EIP funding. The Committee sets these thresholds on a year-to-year basis. The minimum threshold
for fiscal 2007 revenue growth was 6 percent and the minimum threshold for non-GAAP operating
margin was 19.5 percent. If these two thresholds are achieved or exceeded, the maximum funding
pool for payouts is set at 190 percent of the sum of participants’ target awards.
• Actual Awards to Individuals
The Committee is not obligated to fully allocate the maximum funding amount. The Committee
determines the actual awards based on the Company’s financial results as compared to the
financial performance matrix and on an evaluation of an individual’s contributions relative to the
Company’s results. This matrix provides a guide to determining appropriate award levels based
on varying levels of achievement of revenue growth and non-GAAP operating margin, where
a 100 percent award generally equates to the Company’s achievement of its annual operating
plan. For fiscal 2007, a 100 percent award was associated with revenue growth of 21 percent and
non-GAAP operating margin attainment of 26.5 percent. A similar performance matrix is also
used across the Company for determining award funding under the Autodesk Incentive Plan (AIP)
as noted in the following section, thus providing alignment between the incentives for Named