Waste Management 2011 Annual Report Download - page 32

Group exceeded target level performance for income from operations excluding depreciation and amortization;
whereas, the other geographic Groups’ and Company-wide performance exceeded threshold, but fell short of
target on this measure. Additionally, the Company is pleased to have generated a return on invested capital, for
purposes of our performance share unit performance goals, that was well above threshold for the three-year
performance period, resulting in an 86.99% payout on performance share units in shares of Common Stock. This
is a positive development for the Company and executives, after zero payout was earned on performance share
units in 2010 because threshold criteria was not met for the three-year performance period that ended
December 31, 2010. The 2011 results have provided reassurance that our performance goals are challenging, but
attainable. The MD&C Committee believes that the 2011 executive compensation plan successfully aligned our
executive compensation structure with the overall Company strategy and motivated the performance we seek to
reward. Accordingly, the compensation of the Company’s executive officers set forth in the Summary
Compensation Table of this Proxy Statement, whom we refer to as the “named executive officers” or “named
executives,” evidences our commitment to link executive pay with Company performance.
Consideration of Stockholder Advisory Vote and Recent Developments
The MD&C Committee established the 2011 compensation plan in early 2011, before the stockholder
advisory vote on executive compensation in May 2011. However, the MD&C Committee has since noted the
results of the advisory stockholder vote, with 97% of shares present and entitled to vote at the annual meeting
voting in favor of the Company’s executive compensation. Accordingly, the results of the stockholder advisory
vote have not caused the MD&C Committee to recommend any changes to our compensation practices.
The Company continues to adapt its compensation program to best support our strategy and the
accomplishment of our goals. As a result, the MD&C Committee has approved the changes described below to
our executive compensation program for 2012:
•Annual Cash Bonus Performance Goals: We have adopted a new performance measure designed to
increase our focus on controlling costs, based on operating expense, plus selling, general & administrative
expense, as a percentage of net revenue. We have also adopted a new cash flow performance measure,
based on income from operations excluding depreciation and amortization less capital expenditures,
which is designed to increase our focus on disciplined capital spending. These two new measures,
together with our current income from operations margin measure, will make up the three performance
measures for our 2012 annual cash bonuses and will be equally weighted.
•Allocation of Long-Term Incentive Plan Awards: We have increased the weighting of performance
share units, which are dependant on achievement of specified performance measures, from 30%, in 2011,
to 80% of the total value of each named executive’s annual long-term incentive plan award for 2012.
Stock options will continue to encourage and reward stock price appreciation and will comprise the
remaining 20% of the total value of each named executive’s award.
•Performance Share Unit Performance Goals: Half of the performance share units granted in 2012 will
retain the return on invested capital performance measure; while the remaining half of all performance
share units granted in 2012 will be dependant on a new performance measure based on total shareholder
return relative to the S&P 500. All performance share units will continue to have a three-year
performance period.
Our Compensation Philosophy for Named Executive Officers
The Company’s compensation philosophy is designed to:
• Attract and retain exceptional employees through competitive compensation opportunities;
• Encourage and reward performance through substantial at-risk performance-based compensation; and
• Align our decision makers’ long-term interests with those of our stockholders through emphasis on equity
ownership.
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