HR Block 2005 Annual Report Download - page 42

director’’ pursuant to Rule 16b-3 under federal securities laws. In determines the extent to which the requisite performance targets
addition to consisting solely of independent directors, the have been achieved prior to payment of the Financial STI
Committee retains independent compensation consultants to Component. Fiscal year 2005 performance criteria under the
assist it in fulfilling its responsibilities. Financial STI Component consisted of the following: (i) the
The Company continues to be strongly committed to degree to which the Company attained targeted year-over-year
maximizing shareholder value through consistent growth and growth in diluted earnings per share; (ii) year-over-year growth in
profitability. Superior performance by the executive officers and pretax earnings; and (iii) attainment of year-over-year revenue
management team of the Company and its subsidiary goals. In addition, fiscal year 2005 performance criteria included
corporations is essential to reaching that goal. As such, the year-over-year client growth for the U.S. tax services business
Company’s philosophy is to assure that executive compensation segment and year-over-year origination growth for the mortgage
is linked directly to sustained improvements in individual and services business segment. Under the Financial STI Component,
corporate performance and increases in total shareholder return. participants can earn more or less than the target award (from 0%
to 200% of the target award) depending upon how actual results
compare to the pre-established performance targets.
COMPENSATION PROGRAM Discretionary STI Component. Payments under the
BASE SALARY ⬎⬎⬎ Base salaries are determined based on Discretionary STI Component for fiscal year 2005 were based
external competitiveness for similarly-scoped roles in peer upon achievement of strategic and individual performance
companies, internal equity and the executive’s experience, talents objectives that support the Company’s priorities. For most
and performance. executive officers, 20% of the executive’s overall targeted
SHORT-TERM INCENTIVE PROGRAM ⬎⬎⬎ The Company’s STI Program compensation was based on the Discretionary STI
short-term incentive program (the ‘‘STI Program’’) consists of an Component. Actual incentive payouts under the Discretionary
objective incentive compensation component based upon annual STI Component could be from 0% to 200% of the target award,
financial targets tied to business unit or overall corporate results depending upon actual performance against pre-
(the ‘‘Financial STI Component’’) and a discretionary incentive established objectives.
compensation component based on achieving pre-established SHORT-TERM INCENTIVE COMPENSATION PLAN ⬎⬎⬎ In
individual or strategic objectives (the ‘‘Discretionary STI addition to the STI Program, the Company maintains the H&R
Component’’). A heavier emphasis for executive officers (80% of Block Short-Term Incentive Plan, which was approved by the
targeted incentive compensation in most cases in fiscal year Company’s shareholders on September 13, 2000 (the ‘‘Executive
2005) is placed upon the Financial STI Component, which Plan’’). To the extent an officer receives an award under the
specifically relates executive pay to Company performance. Executive Plan, such officer does not receive an award under the
Under the STI Program, the Committee reviews and the Board Financial Component of the STI Program. The Executive Plan
approves financial-performance goals and individual target permits the Company to include a bonus compensation
bonus awards. component in executive officer compensation intended to qualify
Short-term incentive compensation generally is paid in cash. as deductible performance-based compensation under
Short-term incentive payouts exceeding 150% of the targeted Section 162(m) of the Internal Revenue Code. Under the
payouts are paid in restricted stock. Restricted stock is issued Executive Plan, the Committee may grant performance-based
under the Company’s 2003 Long-Term Executive Compensation awards to certain officers of the Company or its subsidiaries who
Plan and is described in more detail under ‘‘Long-Term Incentive are selected by the Committee and approved by the Board,
Compensation’’ below. The amount of restricted stock awarded is including the Company’s Chief Executive Officer and its four
calculated by dividing the cash value of the applicable incentive other highest paid executive officers at the end of the applicable
compensation by the last reported closing price for the tax year. Awards under the Executive Plan are based on
Company’s stock as of June 30, 2005. performance targets reviewed each year by the Committee and
Financial STI Component. Payments under the Financial STI approved by the Board. Fiscal year 2005 performance criteria
Component are made after the end of a fiscal year only if the
under the Executive Plan were the same as the fiscal year 2005
Company (or applicable business unit) has met the financial-
performance criteria under the Financial STI Component.
performance goals reviewed by the Committee and approved by
LONG-TERM INCENTIVE COMPENSATION ⬎⬎⬎ The
the Board for such fiscal year. The Committee reviews and the
Board approves the payout for an executive officer and Company encourages stock ownership by its executive officers
H&R BLOCK 2005 Proxy Statement
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