Logitech 2005 Annual Report Download - page 29

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5. Compensation, Shareholdings and Loans
5.1 Logitech’s General Compensation Policy
Logitech has designed its compensation programs to attract, develop, retain and motivate the high caliber of
executives, managers and staff that is critical to the long-term success of its business. Logitech’s compensation
package is composed of a base salary that is competitive to comparable companies in the industry and region,
periodic cash incentive awards that are based on company performance, and long-term incentive awards that are
comprised of stock options.
Executive Compensation Programs
Logitech’s compensation programs for its Executive Officers are designed to:
• provide compensation competitive to comparable companies in the industry and region;
• provide executives with a competitive compensation that maintains a balance between fixed and
variable compensation and places a significant portion of total compensation at risk;
• align executive compensation with shareholders’ interest by tying a significant portion of compensation
to to increasing share value; and
• support a performance-oriented environment that rewards superior performance.
An Executive’s compensation includes the following key components:
• base salary;
• short-term incentives (cash bonus programs based on financial performance); and
• long-term incentives (stock option awards and employee stock purchase program).
Base Salary
The base salary for Executive Officers is determined on the basis of experience, individual performance, the
average salary levels considered appropriate for comparable positions in the industry and the anticipated value of
the executive’s future contribution to the Company. The Compensation Committee reviews these factors in
approving and recommending to the Board the Executive Officer’s base salary for each fiscal year.
In addition to a base salary, Executive Officers are eligible for the same benefits offered by the Company to
non-executive employees in their jurisdiction of residence. The cost to Logitech of these benefits is reflected in
the compensation of the Executive Officers as disclosed in Section 5.2 below.
Short-Term Incentives
A significant portion of Logitech’s executive cash compensation is variable. The Chairman and the CEO are
eligible for annual bonus incentives based on the financial goals of the entire Company as established by the
Board. Executive Officers, other than the Chairman and the CEO, are eligible for semi-annual bonuses based on
achieving pre-determined financial goals of the Company and/or pre-determined financial goals of the division or
regional entity over which the Executive has responsibility for. The bonus plans include a basic reward for
achieving minimum performance targets and an upside for performance exceeding target expectations. The
Board of Directors may authorize additional cash bonus payments based on outstanding performance. The
Compensation Committee reviews and recommends to the Board the bonus targets for each Executive Officer in
advance of each fiscal year.
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