Energy Transfer 2010 Annual Report Download - page 111

control (as defined in the DC Plan) of ETP, all DC Plan accounts are immediately vested in full. However,
distributions are not accelerated and, instead, are made in accordance with the DC Plan’s normal distribution
provisions.
Risk Assessment Related to our Compensation Structure. We believe our compensation plans and programs for
our named executive officers, as well as our other employees, are appropriately structured and are not reasonably
likely to result in material risk to the Partnership. We believe our compensation plans and programs are
structured in a manner that does not promote excessive risk-taking that could harm our value or reward poor
judgment. We also believe we have allocated our compensation among base salary and short and long-term
compensation in such a way as to not encourage excessive risk-taking. In particular, we generally do not adjust
base annual salaries for the executive officers and other employees significantly from year to year, and therefore
the annual base salary of our employees is not generally impacted by our overall financial performance or the
financial performance of an operating segment. We generally determine whether, and to what extent, our named
executive officers and our other employees receive a cash bonus based on our achievement of specified financial
performance objectives. We use restricted units rather than unit options for equity awards because restricted units
retain value even in a depressed market so that employees are less likely to take unreasonable risks to get, or
keep, options “in-the-money.” Finally, the time-based vesting over five years for our long-term incentive awards
ensures that our employees’ interests align with those of our Unitholders for the long-term performance of the
Partnership.
Director Compensation
The Compensation Committee periodically reviews and makes recommendations regarding the compensation of
the directors of our General Partner. In 2010, non-employee directors of our General Partner received an annual
fee of $40,000 plus $1,200 for each committee meeting attended. Additionally, the Chairman of the Audit
Committee receives an annual fee of $15,000 and the members of the Audit Committee receive an annual fee of
$10,000. The Chairman of the Compensation Committee receives an annual fee of $7,500 and the members of
the Compensation Committee receive an annual fee of $5,000. Employee directors, including Messrs. Warren
and McCrea, do not receive any fees for service as directors. In addition, the non-employee directors participate
in our 2004 Unit Plan and 2008 Incentive Plan. Each director who is not also (i) a shareholder or a direct or
indirect employee of any parent, or (ii) a direct or indirect employee of ETP LLC, ETP, or a subsidiary, who is
elected or appointed to the Board for the first time shall automatically receive, on the date of his or her election
or appointment, an award of 2,500 ETP Common Units. Under our 2004 Unit Plan and 2008 Incentive Plan, the
non-employee directors of our General Partner each receive annual grants of unvested ETP Common Units equal
to an aggregate of approximately $50,000 divided by the fair market value of our Common Units. These ETP
Common Units vest over three years at one-third per year.
Tax and Accounting Implications of Equity-Based Compensation Arrangements
Deductibility of Executive Compensation
We are a limited partnership and not a corporation for U.S. federal income tax purposes. Therefore, we believe
that the compensation paid to the named executive officers is generally fully deductible for federal income tax
purposes.
Accounting for Unit-Based Compensation
For our unit-based compensation arrangements, including equity-based awards issued to certain of our named
executive officers by an affiliate (as discussed above), we record compensation expense over the vesting period
of the awards, as discussed further in Note 8 to our consolidated financial statements.
109