HR Block 2005 Annual Report Download - page 44

Total STI Target was based on year-over-year growth in overall qualified deferred compensation plans, including base salary
corporate earnings per share, (ii) 8% of the Total STI Target was short-term incentive compensation, long-term incentive awards,
based on year-over-year growth in overall revenue and (iii) 40% of and other vested benefit payouts. As a part of this review process,
the Total STI Target was tied to individual business unit the Committee also reviewed executive termination costs for
performance targets. Based upon the results achieved by the each of these officers.
Company, Mr. Ernst earned incentive compensation under the TAX CONSIDERATIONS ⬎⬎⬎ Section 162(m) of the Internal
Executive Plan of $217,140 (32% of target). Revenue Code limits to $1 million the Company’s federal income
Under the Discretionary STI Component of the STI Program a tax deduction for compensation paid to any one executive officer
target award of $165,000 (20% of annual base pay) was named in the Summary Compensation Table of the Company’s
established for Mr. Ernst, with an actual payout to be proxy statement, subject to certain transition rules and
recommended by the Committee for Board approval based upon exceptions for specified types of performance-based
Mr. Ernst’s progress against strategic priorities reviewed by the compensation. The Company has designed the H&R Block
Committee and approved by the Board in June 2004. Based on the Executive Performance Plan and a portion of compensation
Committee’s recommendation, the Board determined that payable under the 2003 Long-Term Executive Compensation Plan
Mr. Ernst earned incentive compensation under the Discretionary so that compensation paid under these plans would be deductible
STI Component of $181,500 (110% of target). All of Mr. Ernst’s under 162(m), although individual exceptions may occur.
short-term incentive compensation was paid in cash. The Committee believes that it is in the Company’s and
Mr. Ernst was granted an option to purchase 110,000 shares of shareholders’ best interests to maximize tax deductibility when
Common Stock at an option price of $46.78 per share, the last appropriate and consistent with shareholder interests. The
quoted market price for the Company’s Common Stock on Committee may recommend for Board approval non-deductible
June 30, 2004, the date of grant. Such option has a term of ten compensation when it believes that such awards are in the best
years and vests in one-third annual increments beginning on the interest of the shareholders, balancing tax efficiency with long-
first anniversary of the date of grant. Mr. Ernst was also awarded term strategic objectives.
15,000 shares of restricted stock. Restrictions on such restricted
stock lapse over a three-year period in one-third annual COMPENSATION COMMITTEE
increments beginning June 30, 2005. Donna R. Ecton, Chairman
REVIEW OF ALL COMPONENTS OF EXECUTIVE Henry F. Frigon
COMPENSATION ⬎⬎⬎ During the course of fiscal year 2005, the Roger W. Hale
Compensation Committee reviewed all components of Tom D. Seip
compensation for Mr. Ernst and other highly compensated Louis W. Smith
executive officers. This review encompassed all forms of
compensation and balances in equity, retirement and non-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION ⬎⬎⬎
The following non-employee directors serve on the Compensation Committee of the Board of Directors: Donna R. Ecton (Chairman),
Henry F. Frigon, Roger W. Hale, Tom D. Seip and Louis W. Smith. No directors on the Compensation Committee (a) are or have been
officers or employees of the Company or any of its subsidiaries, or (b) had any relationships requiring disclosure in the
proxy statement.
H&R BLOCK 2005 Proxy Statement
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