LeapFrog 2015 Annual Report Download - page 156

The following companies were approved by our compensation committee in March 2014 as our direct
peers for the ensuing year:
Arctic Cat Demand Media JAKKS Pacific
K12 Rosetta Stone Rovi
Shutterfly Skullcandy Take-Two Interactive Software
TiVo United Online Universal Electronics
Plantronics
In addition, an industry reference peer group is used as a secondary reference point for our executive and
director compensation programs to identify compensation design trends and ‘‘best practices’’ in our industry.
For 2014, the industry reference peers were Activision Blizzard, Electronic Arts, Hasbro and Mattel,
companies that provide software and/or children’s products. Although they operate in a relevant business or
industry, these companies are included in the industry reference group rather than the direct peer group
because they are significantly larger than we are and were not within the targeted range for net revenue or
market capitalization.
While the compensation committee does not believe that the compensation data generated for the Peer
Group is appropriate as a stand-alone tool for setting compensation due to the unique nature of our business,
it considers this information to be a valuable reference during its decision-making process. In addition to
reviewing analyses of compensation data from the Peer Group, the compensation committee employs the
collective experience and judgment of its members and advisors (including Compensia, management and the
Company’s human resources department) and the full board of directors in determining the total compensation
and the various components provided to our executive officers.
In 2014, the compensation committee directed Compensia to conduct an analysis of the compensation of
our executive officers using data compiled from the Peer Group, supplemented with data from a selected set
of the Radford Global Technology Executive Compensation Survey, including companies with revenue
between $100 million and $1.2 billion. The Radford survey is a broad-based third-party survey that reflects
widespread compensation practices among more than 700 high-technology companies.
Compensation Design and Mix
Each year, the compensation committee evaluates the total compensation of our executive officers with
respect to our overall Company performance, individual performance, changes in scope of responsibility and
any changes in the competitive market for each position. The compensation committee does not have a
pre-established policy or target for the allocation between cash and non-cash compensation or short-term and
long-term incentive compensation. Rather, the compensation committee determines the appropriate level and
mix of incentive compensation, taking into consideration the data provided by Compensia and how the equity
mix creates or awards incentives that might lead to excessive risk-taking. In general, the level of an executive
officer’s variable compensation opportunity (short-term and long-term incentive compensation) increases with
his or her level of responsibility. The compensation committee, however, is careful (i) not to increase the
variable compensation component to such an extent so as to unduly increase the associated level of risk-taking
behavior by our executive officers and (ii) to select performance criteria for the variable compensation
component that aligns individual performance with long-term stockholder interest.
Risk Considerations
Members of our senior management, including the chief executive officer, chief financial officer and
general counsel, along with members of our human resources department, with oversight by the compensation
committee, reviewed our compensation programs and policies to determine whether the incentives provided by
these programs and policies were appropriate or had the potential to encourage excessive risk-taking by our
employees. This assessment was discussed at and in conjunction with our board of directors and compensation
committee meetings held in March 2014, and at a special risk review session of our board of directors in
July 2014.
Our risk assessment focused on the key terms of the Company’s equity compensation and variable cash
compensation programs, such as bonus plans. Our compensation programs were analyzed to determine
whether they introduced or encouraged excessive risk-taking or other behaviors that could have an adverse
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