HR Block 2006 Annual Report Download - page 47

one-half times the target number of performance shares and welfare benefit programs. Benefits for executives generally
(maximum) for superior performance. However, an executive are the same as benefits for all other employees, except that only
may earn as few as one half of the target number of performance executive officers and key employees may participate in the
shares for performance below target. Performance shares reflect Company’s Executive Survivor Plan and Deferred Compensation
a face value equal to the market value of the Company’s stock Plan. Pursuant to the Company’s Executive Survivor Plan, the
price and are paid out in Company common shares at vesting. Company purchases life insurance policies on participating
Unlike restricted stock, performance shares do not pay dividends executive officers with death benefits payable to beneficiaries
during the vesting period. Any dividend equivalents are carried as designated by the participating executive officers.
fractional performance shares until vesting. Unvested The Company does not provide any other perquisites to
performance shares do not carry voting rights. However, shares executive officers. The Company pays for the use of non-
earned through achievement of performance objectives, once commercial aircraft on a time-share or rental basis only when
paid out, will carry voting rights. such use is for business travel purposes. Accordingly, executive
For eligible executives granted awards in fiscal year 2007, officers reimburse the Company for any personal use of non-
performance shares will be earned based on the Company’s total commercial aircraft utilized on a time-share or rental basis.
shareholder return as measured against a broad market index ACCOUNTING FOR STOCK-BASED COMPENSATION –In
and/or cumulative financial performance specific to their fiscal year 2006, the Company recognized stock-based
business responsibilities. compensation expense for the issuance of stock options and
Stock options, restricted stock, and performance shares are restricted stock, as well as stock purchased by employees under
awarded to executive officers annually and sometimes as part of the Company’s employee stock purchase plan pursuant to
an employment offer. The number of shares subject to any award Statement of Financial Accounting Standards No. 123,
is based on the executive officer’s level of responsibility, prior ‘‘Accounting for Stock-Based Compensation.’’ Under this
year’s performance, ability to impact the Company’s future accounting methodology, the Company recognized stock-based
performance, and awards made to executive officers in similar compensation expense for the issuance of stock options,
positions in the market. The Compensation Committee believes restricted stock and the employee stock purchase plan on a
that equity-based awards have been effective in attracting, straight-line basis over applicable vesting periods. The Company
retaining, and rewarding executives and key employees. has adopted Statement of Financial Accounting Standards
DEFERRED COMPENSATION –The Company offers its No. 123(R), ‘‘Share-Based Payment,’’ for fiscal year 2007.
executive officers and key employees a deferred compensation EXECUTIVE STOCK OWNERSHIP GUIDELINES –The
plan designed to enhance financial security upon retirement by Company believes that its executive officers should have a
offering participants the opportunity to defer salary and short- significant financial stake in the Company so that their interests
term incentive compensation. The Company contributes to the are aligned with those of the shareholders. To that end, the Board
plan an annual match of 100% of the first 5% of aggregate salary of Directors has adopted stock ownership guidelines that describe
and bonus deferred to the plan and the Company’s qualified the Board’s expectations that certain executive officers should
retirement plans, less any employer matching contributions made own shares of Company stock with an aggregate value that meets
previously to one of the Company’s qualified retirement plans for or exceeds certain specified multiples of the executive’s base
that year. Company contributions vest over a ten-year period salary. The guidelines provide for an ownership multiple of five
starting from the date an executive officer first participates in the times base salary for the Company’s Chief Executive Officer and
plan. In addition, Company contributions vest upon a change in lower ownership multiples for other executive officers. Executive
control. Gains or losses are posted to a participant’s account officers subject to the Company’s executive stock ownership
pursuant to his or her selection of various fixed rate, variable rate guidelines generally are in compliance, or are progressing toward
and Company stock investment alternatives. The plan is compliance, with such guidelines.
unfunded, and benefits are paid following termination of COMPENSATION OF CHIEF EXECUTIVE OFFICER –The
employment, except in cases of disability or hardship. salary, short-term incentive compensation, and long-term
BENEFITS AND PERQUISITES –The Company provides incentive compensation of the Chief Executive Officer generally
certain benefits to all employees such as employer matching are determined pursuant to the policies described above for all
contributions to the Company’s qualified retirement plans, an other executive officers of the Company.
employee stock purchase plan that permits purchases of the Mark A. Ernst has served as President and Chief Executive
Company’s common stock at a discount, life insurance and health Officer of the Company since January 1, 2001 and as Chairman of
H&R BLOCK 2006 Proxy Statement
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