Waste Management 2011 Annual Report Download - page 31

EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
The objective of our executive compensation program is to attract, retain, reward and incentivize
exceptional, talented employees who will lead the Company in the successful execution of its strategy. The
Company seeks to accomplish this goal by designing a compensation program that is supportive of and aligns
with the strategy of the Company and the creation of stockholder value, while discouraging excessive risk-taking.
The Company is dedicated to three transformational goals that we believe will drive continued growth and
leadership in a dynamic industry: know more about our customers and how to service them than anyone else; use
conversion and processing technology to extract more value from the materials we manage; and continuously
improve our operational efficiency. The following key structural elements and policies further the objective of
our executive compensation program:
• a substantial portion of executive compensation is linked to Company performance, through annual cash
performance criteria and long-term incentive awards. As a result, our executive compensation program
provides for a significant difference in total compensation in periods of above-target Company
performance as compared to periods of below-target Company performance;
• performance goals are designed to be challenging, yet achievable;
• performance based awards include threshold, target and maximum payouts correlating to a range of
performance and are based on a variety of indicators of performance, which limits risk-taking behavior;
• our compensation mix targets approximately 50% of total compensation of our named executives (and
approximately 68% in the case of our Chief Executive Officer and President) to result from long-term
equity awards, which aligns executives’ interests with those of stockholders. The MD&C Committee
altered the overall compensation allocation of operational leaders in 2011 to increase the weight of long-
term equity compensation;
• performance stock units’ three-year performance period, as well as stock options’ vesting over a three-
year period, link executives’ interests with long-term performance and reduce incentives to maximize
performance in any one year;
• all of our named executive officers are subject to stock ownership requirements, which we believe
demonstrates a commitment to, and confidence in, the Company’s long-term prospects;
• the Company has clawback provisions in its equity award agreements and recent employment
agreements, as well as a general clawback policy, designed to recoup compensation in certain cases when
cause and/or misconduct are found;
• our executive officer severance policy implemented a limitation on the amount of benefits the Company
may provide to its executive officers under severance agreements entered into after the date of such
policy; and
• the Company has adopted a policy that prohibits it from entering into new agreements with executive
officers that provide for certain death benefits or tax gross-up payments.
The executive compensation program for 2011 fulfilled its objective by helping the Company manage
through a challenging year and finish the year with strong fourth quarter results, poised to continue its progress
on strategic growth initiatives and cost savings programs. For Waste Management, 2011 was a year of continued
investment in the future, while also continuing to produce strong cash flows, return cash to our stockholders and
take a disciplined approach to yield management. In line with the Company’s 2011 financial results, the annual
cash incentive awards for 2011 that are based on Company-wide performance metrics warranted a payout of
84.96% of target. This payout reflects that the Company exceeded the maximum performance level on its pricing
improvement goal. However, the Company fell short of the threshold performance level for the income from
operations margin performance goal, which substantially lowered the annual cash bonus payout. The Midwest
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