Sunoco 2012 Annual Report Download - page 125

Elements of Compensation: Unless specified to the contrary below, references in this section of the CD&A
to “NEOs,” or “executive officers,” does not include Mr. Salinas or the Sunoco Executives.
•Base Salary: Base salary is designed to provide for a competitive fixed level of remuneration that
attracts and retains executive officers, and compensates them for their level of responsibility and
sustained individual performance (including experience, scope of responsibility, and results
achieved). The salaries of the NEOs are reviewed on an annual basis. The compensation
consultant provides data comparing the salaries of the NEOs to the salaries of executives in the
Compensation Comparative Group. The general partner and the Compensation Committee attempt
to establish and maintain base salaries for the NEOs at or near the median level of competitive
market base salary data. Base salaries also are influenced by internal pay equity (fair and
consistent application of compensation practices). The Compensation Committee, with input from
the compensation consultant and the Chief Executive Officer (except with respect to the Chief
Executive Officer’s own salary), approves all base salaries for the NEOs. The Summary
Compensation Table on page 133 includes the NEO base salaries that were approved for 2012 or,
for those NEOs that were employed for only a partial year, the salaries actually earned in 2012. At
the NEO level, the balance of compensation is weighted toward pay-at-risk compensation (annual
and long-term incentives).
•Annual Incentive Awards:
•Why the General Partner Has Adopted the Annual Incentive Plan. The general partner’s Annual
Incentive Plan is designed to enhance the performance of key employees, including NEOs, by
providing annual cash incentive opportunities for achievement of annual financial and operational
performance goals. In particular, annual incentive awards are provided to NEOs and other key
employees in order to provide competitive incentives to those who can significantly influence
performance and promote achievement of our short-term business objectives. The Compensation
Committee, in its sole discretion, determines the amount of the payments, if any, made to NEOs
for each fiscal year. The Compensation Committee also may amend or change the Annual
Incentive Plan at any time.
•Determination of the Amounts Awarded Under the Annual Incentive Plan. Under the plan, an
individual’s annual incentive payout amount is determined by multiplying: (a) the product of his
or her base salary and individual incentive guideline, by (b) a factor ranging from zero to 200
percent (the “Payout Percentage”), based upon the level of attainment of specific pre-established
goals. For the 2012 annual incentive program, the Committee selected EBITDA less maintenance
capital, and certain Partnership-related strategic milestones (described below) as the established
performance goals. These goals were selected because they were deemed to be important for our
short-term success and future sustainability. Multiple performance goals were selected because of
the belief that no one goal was sufficient to capture the total performance that we sought to drive.
Goals were established at levels that the Compensation Committee believes provide meaningful
incentives for management to continue to be focused on operations excellence. If we do not
achieve at least the minimum threshold performance goals, no award payment will be made.
These performance goals and strategic milestones are not GAAP financial measures. For purposes
of calculating the eventual payout of awards made for the 2012 plan year under the Annual
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