LeapFrog 2012 Annual Report Download - page 122

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• Target the key elements of executive compensation (base salary, annual bonus opportunity and
equity incentive awards) to provide total compensation packages for our executives individually and
as a group at approximately the 50
th
percentile of our direct peer group;
• Provide flexibility such that target compensation for individual executives may vary above or below
the median based on a variety of factors, such as the executive’s skill set relative to his or her peers,
experience and time in the executive’s position, the importance of the executive’s role to us, the
difficulty of replacement, the executive’s performance and internal pay equity considerations; and
• Ensure our compensation plans and arrangements avoid incentives that might lead to excessive
risk-taking.
Executive Compensation Considerations
Role of Compensation Committee and Management
Our compensation committee is responsible for the design, implementation, and oversight of our
executive compensation program. Generally, our CEO makes recommendations to the compensation committee
regarding the short-term and long-term compensation for our executives, including our named executive
officers (other than with respect to his own compensation). These recommendations are based on his
assessment of our financial and operational results, each executive’s contribution to these results, the
executive’s progress toward achieving his or her individual goals, and input from the compensation consultant
retained by the compensation committee to provide information on competitive market practices. The
compensation committee’s decisions regarding our CEO’s compensation are based on its assessment of our
financial and operational results, his contributions to these results, and, to a lesser extent, his progress toward
achieving his individual goals, and information on competitive market practices.
Role of Compensation Consultant
The compensation committee engaged Compensia, Inc., or Compensia, a national compensation
consulting firm, to provide advice and guidance on our executive compensation policies and practices and to
provide relevant information about the executive compensation practices of similarly situated companies.
Compensia assisted in the preparation of compensation materials on executive compensation proposals in
advance of compensation committee meetings, including changes to compensation levels for our executives,
the design of our equity programs and other executive benefit programs. In addition, Compensia reviewed and
advised the compensation committee on compensation materials relating to executive compensation prepared
by management for its consideration.
As part of our annual executive compensation review process, Compensia, under the direction of the
compensation committee, conducted a review of the competitiveness of our executive compensation program,
including base salaries, annual bonus opportunities, equity awards, and other executive benefits, by analyzing
the compensation practices of the companies in our compensation peer group (as described below), as well as
data from third-party compensation surveys. The compensation committee used the results of this analysis to
assess the competitiveness and risks of our executives’ total compensation packages.
Based on the consideration of the various factors as set forth in the rules of the SEC, the compensation
committee does not believe that its relationship with Compensia and the work of Compensia on behalf of the
compensation committee has raised any conflict of interest.
Use of Competitive Data
To monitor the competitiveness of our executives’ compensation, the compensation committee uses a
compensation peer group that reflects the pay of executives in comparable positions at similarly situated
companies. Typically, this compensation peer group, or the Peer Group, is composed of a cross-section of
direct competitors, as well as companies in relevant industries with a focus on software, educational and
leisure products. The Peer Group consists of both ‘‘direct peers’’ and ‘‘industry reference peers.’’
The direct peers are publicly-held companies with market capitalizations and net revenues similar to our
own and which operate in relevant industries. The direct peers are companies which the compensation
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