ComEd 2006 Annual Report Download - page 336

Database. The general industry companies currently include: 3M, Abbott Laboratories, BellSouth
Corp., Caterpillar Inc., General Mills Inc., Honeywell International, International Paper, Johnson
Controls Inc., PepsiCo Inc., PPG Industries, Inc., Union Pacific Corp., and Weyerhaeuser Company.
The energy services companies included American Electric Power, Centerpoint Energy, Dominion
Resources, Inc., Duke Energy Corp., Edison International, Entergy Corp., FirstEnergy, PG&E Corp.,
Public Service Enterprise Group Incorporated, Southern Co., TXU Corp., and Xcel Energy, Inc.
In addition to this study, the compensation committee has periodically benchmarked and refined
the company’s severance and change in control arrangements and perquisites programs.
Elements of Compensation
This section is an overview of our compensation program for NEOs. It describes the various
elements and discusses matters relating to those items, including why the compensation committee
chooses to include items in the compensation program. The next section describes how 2006
compensation was determined and awarded to the NEOs.
Exelon’s executive compensation program is comprised of four elements: base salary; annual
incentives; long-term incentives; and other benefits.
Cash compensation is comprised of base salary and annual incentives. Equity compensation is
delivered through long-term incentives. Together, these elements are designed to balance short-term
and longer-range business objectives and to align NEOs’ financial rewards with shareholders’
interests. Approximately 30% to 55% of NEOs’ total target direct compensation is delivered in the form
of cash. Equity compensation accounts for approximately 45% to 70% of NEO total target direct
compensation. The range in the mix of cash and equity compensation is consistent with competitive
compensation practices among companies in the peer group. The compensation committee believes
that this mix of cash and equity compensation strikes the right balance of incentives to pursue specific
short and long-term performance goals that drive shareholder value.
Base Salary
Base salaries for Exelon’s NEOs are determined based on individual responsibility, performance
and experience, with reference to the salaries of executives in similar positions in the peer group.
Generally, salaries are targeted to approximate the median (50th percentile) salary levels for
comparable executives at the companies included in the peer group. The compensation committee
also takes into consideration unique circumstances required to attract and retain talent. Exelon’s
compensation program for NEOs is designed so that approximately 15% to 35% of NEO total direct
compensation is in the form of base salary, consistent with practices at the companies in the peer
group. The compensation committee reviews and recommends to the full board of directors the level of
NEOs’ base salaries at its meeting in January of each year, when the results of the prior year are
known. The independent directors of the Exelon board, on the recommendations of the compensation
committee with input from the CEO, determine NEOs’ base salaries. In addition, Mr. Rowe has been
delegated authority from the compensation committee to adjust base salaries for retention purposes or
unique circumstances for officers who are not executive vice presidents or higher.
Annual Incentives
Annual incentive compensation is made available to all salaried employees, including NEOs, all
non-represented hourly employees and represented employees to the extent provided in their
applicable collective bargaining agreement. It is designed to provide incentives for achieving short-term
financial and operational goals for the company as a whole, and for subsidiaries, individual business
units and operating groups, as appropriate. Under the annual incentive program, cash awards are
331