Kodak 2004 Annual Report Download - page 161
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2 0 0 5 N O T I C E O F A N N U A L M E E T I N G A N D P R O X Y S T A T E M E N T
COMPONENTSOFEXECUTIVECOMPENSATIONPROGRAM
ThethreecomponentsoftheCompany’sexecutivecompensationprogramare:
•basesalary;
•short-termvariablepay;and
•long-termincentives.
BaseSalary
Basesalaryistheonlyfixedportionofanexecutive’scompensation.Eachexecutive’sbasesalaryisreviewedannuallybasedontheexecutive’srelative
responsibilityandmarketcomparisons.
Short-TermVariablePay
EffectiveJanuary1,2002,theCompensationCommitteeimplementedtheExecutiveCompensationforExcellenceandLeadershipPlan(EXCEL),anew
executiveassessmentandshort-termvariablepayprogramfortheCompany’sexecutives.PayoutsunderEXCELarebasedonthesuccessfulattainment
ofspecificfinancialgoalsestablishedbytheCommitteeinFebruaryofeachyear.For2004,thesefinancialgoalswerebasedonrevenueandinvestable
cashflow.EXCELplacesfocusonrevenuegrowthasabasisforrewards,providesastrongtietocurrentyearperformance,allowsforrewardsatanac-
celeratedrateforperformanceaboveexpectations,involvestwokeygoalsthatarealignedandfocusedonourshort-andlong-termsuccess,containsan
assessmentofpeopleleadershipandallowsdiscretioninassessingperformanceandrewards.AdescriptionofEXCELissetforthbeginningonpage36.
Asastartingpointindeterminingthe2004corporatefundingpool,theCommitteenotedthattheCompanysubstantiallyexceededitsperformancetarget
forrevenueandalsoexceededitsperformancetargetforinvestablecashflow.Asaresultofthesestrongresults,the2004EXCELperformancematrix
yieldedapayoutat127%oftarget.
Inestablishingthecorporatefundingpoolfortheyear,theCommitteetookintoconsiderationtwootherfactors:1)theCompany’sperformanceagainstits
2004baselineEXCELmetricsdescribedonpage36and2)theacceleratedpaceatwhichtheCompanyimplementeditsrestructuringeffortsinresponse
tofasterthanexpecteddeclinesinthetraditionalfilmbusiness.
WithregardtotheCompany’sperformanceagainstits2004EXCELbaselinemetrics,theCommitteenotedthattheCompanyachieveditsearningsfrom
operationsgoal,wasaheadofplaninexecutingitsnewbusinessmodel,generallyachieveditscustomersatisfactiongoalandnearlysatisfieditsaggres-
sivedigitalrevenuegrowthgoal.Againstthesepositiveresults,theCommitteealsoconsideredmanagement’sinabilitytosatisfyitstargetdayssupply
ofinventoryfromcontinuingoperationsgoalfor2004.Inadditiontothesefactors,theCommitteetookintoaccounttheexceptionalmannerinwhichthe
Companyeffecteditsrestructuringeffortsin2004.TheCommitteenotedthattheCompany’s2004restructuringpaymentsexceededplanby$90million.
Afterevaluatingtheseresultsintotal,theCommitteesetthecorporatefundingpoolat127%oftarget,whichisthelevelofpayoutyieldedbytheperfor-
mancematrix.TheSummaryCompensationTableonpage34liststheawardsfor2004tothenamedexecutiveofficers.
TheCompensationCommitteedeterminestheamountoftheawardpoolthatisallocatedtoeachoftheCompany’sexecutiveofficers.Inmakingthese
determinations,theCompensationCommitteeconsidersthesamefactorsthatareusedtoassessthePlan’sotherparticipants:performanceagainstpre-
establishedindividualgoals,leadershipandsupportoftheCompany’sdiversityandinclusionstrategy.Fundsareallocatedtoparticipantsbasedoneach
participant’sindividualperformance.
Long-TermIncentives
Beginningin2004,long-termcompensationisprovidedtotheCompany’sexecutivesprincipallyintheformofperformancestockunitsundertheLeader-
shipStockProgram.AdescriptionoftheLeadershipStockProgramissetforthonpage39.OnlytheCompany’sofficersareeligibleforanannualgrant
ofstockoptions.AdescriptionoftheCompany’sstockoptionprogramissetforthonpage36.ThetargetLeadershipStockawardsfortheCompany’s
officersarereducedtoreflecttheircontinuingparticipationinthestockoptionprogram.
TheCompanyalsoiscontinuingitspracticeofperiodicallyawardinggrantsofrestrictedstockorstockoptionstoselectedexecutives.Theseawardswill
generallybemadetoeither:1)inducetherecipientstoremainwithorbecomeemployedbytheCompanyor2)recognizeexceptionalperformance.
TheLeadershipStockProgramhasreplacedthePerformanceStockProgram,whichmeasuredperformanceoverathree-yearperiodbasedonthe
Company’stotalshareholderreturnrelativetothosecompanieswithintheStandard&Poor’s500CompositePriceIndex.ThependingcyclesofthePerfor-
manceStockProgram,however,willcontinuetorununtiltheyexpire.BasedontheCompany’sperformanceoverthethree-yearperformancecycleending
in2004,noawardswerepaidforthiscycle,otherthanthoseawardsearnedunderthecycle’sExecutiveIncentiveProgram,whichwerereportedinlast
year’sProxyStatementandarereferencedinfootnote(f)totheSummaryCompensationTableonpage34.