Tech Data 2013 Annual Report Download - page 117

Table of Contents
occurrences, including the adjustments to operating income noted above, the impact of share repurchases on weighted average shares outstanding,
and the net benefit associated with the release of a deferred tax valuation allowance in the European region.
The combination and weighting of performance measures for our NEOs has been the same since fiscal 2009. The Committee believes that this
consistency is an important factor in creating a culture with a shared understanding of the drivers of corporate performance and shareholder value.
For fiscal 2013, the target bonus amount, identification and weighting of performance measures, and acceleration/deceleration table information are
set forth below in "Determination of Compensation for Fiscal 2013".
Long
-Term Incentives - The Committee grants equity incentives to our NEOs under the shareholder-approved Equity Plan. Equity incentives are
designed to create a mutuality of interest with shareholders by motivating executives to manage the Company’s business so that the shareholders’
investment will grow in value over time. The equity incentives also motivate employees to remain with the Company by spreading the vesting of
the grant over several years. This retention function is critical because the Company does not maintain a defined benefit pension plan and does not
provide other post-retirement medical or life benefits for NEOs due to their costs.
Equity incentives are granted at the fair market value on the date of grant and are typically granted annually at our March Board and Committee
meetings. The Committee may, however, also approve equity incentives at any regularly scheduled Committee meeting during the year as it
determines necessary to enhance retention, motivate our NEOs, reward exceptional performance, or otherwise address unusual circumstances.
Equity incentives for new hires and promotions are made at the regularly scheduled quarterly Committee meeting following the quarter in which the
hire or promotion occurred.
The decision of what type of equity to grant and the value of the award is based upon an evaluation of the Company’s annual operating plan, the
desirability of long-term service from the executive officer, the perceived value to the executive, the dilutive effect to the shareholders, the effect of
the accounting rules on expensing the award, and the number of equity incentive awards issued to other executive officers in the Company with
approximately the same responsibility as the executive officer at issue. The value of the annual equity incentive award is typically set as a
percentage of targeted total cash compensation.
The Company has used a variety of equity award vehicles over the years depending on the circumstances. In the past, the Company has issued
traditional stock options with multi-year vesting that are still outstanding and exercisable. The Company has also issued maximum value stock-
settled stock appreciation rights (“MVSSARs”),
or maximum value options. MVSSARs provide executives with the opportunity to benefit from the
increase in our stock price from the award date to the date of exercise, but place a ceiling of $20 per share on the total gain that can be realized. The
value cap significantly reduces the expense to the Company and allows a consistent calculation of the expense. The stock appreciation right that is
part of the MVSSARs reduces the dilutive impact of the award. The Company also issues Restricted Stock Units (“RSUs”), which generally result
in less dilution to the shareholders than other equity awards. In times of macroeconomic uncertainty, RSUs provide a retention value superior to
MVSSARs or traditional stock option awards. In the past, the Committee has granted RSUs vesting based on performance, time, or a combination
of these factors. The NEO equity awards for fiscal 2013 were time-based vesting RSUs and are described below in "Determination of
Compensation for Fiscal 2013, Equity Incentive Awards. "
Stock Ownership Guidelines - In March 2005, the Committee approved stock ownership guidelines for certain key executive officers, including our
NEOs. The executive officers are required to accumulate shares of Company stock, through owned shares or retention of stock awards, equal in
value to a multiple of their base salary. As of fiscal 2013 year end, the target accumulations were two times base salary for Mr. Dutkowsky; one
times base salary for Mr. Howells, Mr. Cano and Mr. Wright; and 0.5 times base salary for Mr. Tonnison. There is no specified time within which
the defined share ownership must be attained; however, until the ownership target is met, these executive officers are required to retain 50% of all
of the net shares generated, after tax, for any exercise of equity incentive awards issued on or after March 31, 2005.
IRS Code Section 162(m)
- Section 162(m) of the Internal Revenue Code imposes a limitation on the amount of compensation paid to each covered
executive that can be deducted by the Company for federal income tax purposes. Compensation paid related to U.S. operations in excess of $1
million is not deductible in the U.S. unless it meets criteria for exemption from the deduction limitation. Certain types of performance-based
compensation are excluded from the limitations of Section 162(m). In structuring the overall compensation paid to the NEOs, the Committee
considers the deduction limitation imposed by Section 162(m), but in some circumstances a portion of compensation may not be deductible.
Determination of Compensation for Fiscal 2013
Information Considered
- In determining compensation for fiscal 2013, the Committee considered strategic initiatives, market dynamics, business
objectives, its annual operating plan, and market data provided by Exequity LLP regarding executives from our peer group. Comparative data at the
50
th
percentile and a breakdown of compensation from certain executives from the peer group
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