Ingram Micro 2007 Annual Report Download - page 30

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award based on both individual country and business unit performance and aggregate regional performance for their
respective regions. Similar to the Corporate Officer program, 80% of the earned award was based on the weighted
average payout of each country or business unit in their respective region (weighted on 2007 operating plan
revenue). The remaining 20% of their earned award was based on the aggregate pretax profit and working capital
days (or economic profit in the European Region), for their respective region. Mr. Koppen earned an incentive
award payment of 108.1% of his target award, and Mr. Maquet earned an incentive award payment of 143.5% of his
target award.
Committee’s Exercise of Discretion. The Committee has the ability to make discretionary adjustments to
awards under the annual incentive plan but generally exercises this discretion only in exceptional circumstances
when performance was impacted because of events outside the control of management, such as changes in
accounting standards or to recognize and reward exceptional performance.
In exercising its discretion, the Committee approved the following exceptions in calculating the award
payments under the 2007 Executive Incentive Award Program:
• In Q1, the Company recorded charges of approximately $33.8 million related to a long-disputed tax on
software imports in Brazil. This charge effectively eliminated any realistic possibility for management
associates in Brazil or the Latin American Regional headquarters to reach the threshold pretax earnings
under the terms of the incentive award program. With most of fiscal year 2007 still ahead and management’s
desire to continue to motivate regional and country management to drive higher performance in fiscal year
2007, the Committee decided to exclude these charges from the calculation of the earned incentive awards.
However, the Committee approved a reduction in the resulting award payments in Brazil by 25% and
reduced the awards for the Latin America Region by 10%. These actions resulted in a revised award payment
to Mr. Maquet. However, the exclusion of the $33.8 million was not included in the award calculations for
the Corporate NEOs.
• The 2007 operating plan did not include the final estimated costs for a worldwide process improvement
project that was re-scoped and redesigned after the operating plan had been approved. The impact of this
decision resulted in estimated incremental costs of $12 million above original operating plans. Allocation of
these additional costs through management fees to the countries negatively impacted their results versus the
operating plan. Because country-level management did not have the ability to make decisions regarding the
redesign or the timing of related expenses, the Committee approved excluding the incremental allocated
expenses over the original project plan to the countries from the country-level award calculations. This in
turn, affected the award calculations for two of our Regional NEOs (i.e., Messrs. Monié and Koppen).
However, the exclusion of the $12 million incremental cost was not included in the award calculations for the
Corporate NEOs.
• The 2007 operating plan contained an assumption with respect to the timing of recognition of customer and
vendor early pay discounts and shipments in transit that differed from how actual results are reported under
US Generally Accepted Accounting Principles (“GAAP”). The German operation met its pre-established
economic profit goal despite this difference in reporting, but because of this difference, it did not meet its
minimum (threshold) level of pretax income needed to earn a payout under the terms of the incentive award
program, which would otherwise result in no payout to participants in the German operation. Given the
overall strength and year-over-year improvement in Germany’s performance for the year, the Committee
approved waiving the minimum pretax income requirement and allowing our associates in Germany to
receive an award based on the results of their economic profit improvement. This exception affected the
award calculation for Mr. Koppen. However, this exception was excluded from the award calculations for the
Corporate NEOs.
• The cumulative effect of the above exceptions resulted in an increase in the percentage of target bonus
payments made to Messrs. Monié, Koppen and Maquet as follows: from 191.1% to 192.4%, for Mr. Monié
on the Asia Pacific portion of his bonus payment, from 100.0% to 108.1% for Mr. Koppen and from 0.0% to
143.5% for Mr. Maquet.
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