Sunoco 2013 Annual Report Download - page 112

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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.
• 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. For the year ended December 31, 2013, the Compensation Committee utilized ETP’s compensation
methodology, as well as the pre-Merger compensation methodology, both as described above. Base salaries also are
influenced by internal pay equity (fair and consistent application of compensation practices). At the NEO level, the
balance of compensation is weighted toward pay-at-risk compensation (annual bonuses and long-term incentives). The
Compensation Committee, with input from the President and Chief Executive Officer (who we sometimes refer to in
this CD&A as our Chief Executive Officer), except with respect to the Chief Executive Officer’s own base salary,
approves all base salaries for the NEOs. The Summary Compensation Table includes the NEO base salaries that were
approved for 2013. Except for the base salary of the Chief Executive Officer, which has been increased for the 2014
calendar year, the base salaries of the other NEOs are expected to remain in effect until July 1, 2014.
• Annual Bonuses: In addition to base salary, the Compensation Committee makes a determination whether to award
our NEOs discretionary annual cash bonuses following the end of the year. For 2013, annual bonuses were determined
under the Sunoco Partners LLC Annual Short-Term Incentive Bonus Plan (the “Bonus Plan”), which replaced the
Sunoco Partners LLC Annual Incentive Plan (the “Annual Incentive Plan”) during such year. Discretionary bonuses, if
awarded, are intended to reward our NEOs for the achievement of financial performance objectives during the year for
which the bonuses are awarded in light of the contribution of each individual to our profitability and success during
such year. In this regard, the Compensation Committee takes into account whether the Partnership achieved or
exceeded its earnings before interest, taxes, depreciation, amortization and other non-cash adjustments (“Adjusted
EBITDA”) budget for the year (as further described in Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations-Non-GAAP Financial Measures” above), which is approved by the Board of
Directors as discussed below. The Compensation Committee does not establish its own financial performance
objectives in advance for purposes of determining whether to approve any annual bonuses, and the Compensation
Committee does not utilize any formulaic approach to determine annual bonuses.
The Partnership’s internal financial budgets are generally developed for each business segment, and then
aggregated with appropriate corporate level adjustments, to reflect an overall performance objective that is reasonable
in light of market conditions and opportunities based on a high level of effort and dedication across all segments of the
Partnership’s business. The evaluation of the Partnership’s performance versus its internal financial budget is based on
the Partnership’s Adjusted EBITDA for a calendar year. In general, the Compensation Committee believes that
Partnership performance at or above the Adjusted EBITDA budget would support bonuses to our NEOs ranging up to
120% of their base salaries, with the exception of our Chief Executive Officer, whose short-term annual cash bonus
target was set by the Compensation Committee for 2013 at 135% of his 2014 base salary.
In February 2014, the Compensation Committee approved a cash bonus relating to the 2013 calendar year to Mr.
Hennigan of $810,000, representing 135% of his 2014 base salary and the bonus target ranges and total bonus pool
under which bonuses to NEOs would be awarded for the 2013 calendar year, and the Chief Executive Officer
determined the actual cash bonuses for the NEOs, other than his own, within the annual bonus target ranges approved
by the Compensation Committee. In approving Mr. Hennigan’s cash bonus for 2013 and the bonus target ranges and
pool for the other NEOs, the Compensation Committee took into account the achievement by the Partnership of
approximately 102% of its Adjusted EBITDA budget for 2013 as well as the individual performances of these
individuals with respect to promoting the Partnership’s financial, strategic and operating objectives for 2013. The
individual bonus target ranges for each NEO also reflect the Compensation Committee’s view of the impact of such
individual’s efforts and contributions towards (i) achievement of the Partnership’s success in exceeding its internal
financial budget, (ii) the development of new projects that are expected to result in increased cash flows from
operations in future years, (iii) the completion of mergers, acquisitions or similar transactions that are expected to be
accretive to the Partnership and increase distributable cash flow, and (iv) the overall management of the Partnership’s
business.
• Long-Term Incentive Awards (Equity Awards):
• Why the LTIP was Adopted. Long-term incentive awards for executive officers are granted under the LTIP in
order to promote achievement of our long-term strategic business objectives. The LTIP was designed to align
the economic interests of executive officers, key employees and directors with those of our unitholders; to
provide competitive compensation opportunities that can be realized through attainment of performance