Ingram Micro 2007 Annual Report Download - page 25

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Committee Meetings. Generally, at the last Committee meeting of each fiscal year, the following actions are
reviewed and approved:
• Base pay levels for the executive officers and the Chief Executive Officer to be effective the first full pay
period of the next fiscal year.
• The general design and metrics for the annual Executive Incentive Award Program (annual bonus) for the
next fiscal year and the target incentive award value for each executive officer as a percentage of their base
salary paid during the fiscal year. Actual threshold, target, and maximum performance goals are determined
by the Committee in January of the new fiscal year following approval of the Company’s annual operating
plan by our Board of Directors.
• The design and metrics for the Executive Long-Term Performance Share Program, or the “EIP Program,”
under which performance-vesting restricted stock units are granted for the three-year measurement period
commencing the next fiscal year. Actual threshold, target, and maximum performance goals are established
by the Committee based on the Company’s three-year strategic plan approved by our Board of Directors and
various historical external market comparison factors.
• The equity award values to be granted as stock options and performance restricted stock units for each
executive officer and the Chief Executive Officer in January of the next fiscal year.
• The actual number of stock options and performance-vesting restricted stock units to be awarded is
determined by procedures and calculations previously adopted by the Committee (see “2007 Long-Term
Incentive Awards,” elsewhere in this proxy statement).
Factors in Designing and Determining Levels of Executive Compensation
The primary focus in setting compensation levels is to approximate the competitive market by targeting the
market median; the primary basis for making payouts is achievement of financial results aligned with shareholder
interests. The Committee has established a program designed to keep it abreast of emerging trends and asks its
consultant to report on these trends on a regular basis. This includes the use of equity compensation — including the
prevalence of specific incentive vehicles, the goals used in incentive programs, and the relative importance of each
component of compensation. In some cases, officer incentive opportunities have been adjusted from market for
internal consistency but market practice is preeminent in setting overall compensation levels. Performance versus
pre-established goals is the most important factor in making actual awards.
Benchmarking. Generally, the Company uses benchmarks in determining executive officer compensation
annually against a comparator group of companies. Ingram Micro management engages an executive compensation
consulting firm to conduct a total compensation study of its executive officers. For 2007, Hewitt collected and
reported the survey data which was then reviewed by Cook. Cook provided the Committee with its own analysis and
conclusions to be drawn from the data and advised the Committee on setting appropriate compensation levels for
Ingram Micro’s executive officers including the Chief Executive Officer.
The Company reviews the comparator group of companies each year. Historically, we have been challenged in
defining an appropriate comparator group against which to benchmark our executive officers’ compensation.
Although we have direct competitors, this is a small group, some of whom have revenue that is substantially less
than Ingram. We have attempted to use a limited number of peer companies in the past to benchmark both our
executive officer compensation and financial performance but obtained inconsistent results from year to year due to
the small number of companies included in the peer group. As a result, we now use a subset of the Fortune 500 in
Hewitt’s database, because it represents the relevant labor market from which we recruit executive talent. The
Fortune comparator group for the 2006 report, which was used by the Committee in making compensation decisions
for 2007, consisted of 189 non-financial companies in Hewitt’s database with the following characteristics:
• U.S.-based public corporations,
• Global operations, and
• Under 100 billion in annual revenue.
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