Waste Management 2011 Annual Report Download - page 38

Group Vice Presidents, which includes approximately 49% of total compensation relating to long-term equity,
while long-term equity comprises almost 68% of Mr. Steiner’s total compensation.
Chief Executive Officer and President Senior Group Vice Presidents (average)
15%
17%
68%
29%
22%
49%
Base Salary
Annual Cash
Bonus
Long-Term Equity
Incentive Awards
Internal Pay Equity. The MD&C Committee considers the differentials between compensation of the
individual named executive officers, as well as the additional responsibilities of the Chief Executive Officer and
President compared to the other executive officers. Internal comparisons are also made between executive
officers and their direct reports. The MD&C Committee confirms that the compensation paid to executive
officers is reasonable compared to that of their direct reports, while recognizing that an executive’s actual total
compensation, as a multiple of the total compensation of his or her subordinates, will increase in periods of
above-target performance and decrease in times of below-target performance.
Tax and Accounting Matters.Section 162(m) of the Internal Revenue Code of 1985, as amended (“Code
Section 162(m)”), denies a compensation deduction for federal income tax purposes for certain compensation in
excess of $1 million paid to our Chief Executive Officer and President and our other three highest paid
executives who are employed on the last day of our fiscal year. “Performance based” compensation meeting
specified standards is deductible without regard to the $1 million cap. We design our compensation plans to be
tax efficient for the Company where possible. However, our MD&C Committee reserves the right to structure the
compensation of our executive officers without regard for whether the compensation is fully deductible if, in the
MD&C Committee’s judgment, it is in the best interests of the Company and stockholders to do so.
The annual bonus plan is designed to comply with the performance-based compensation exemption under
Code Section 162(m) by allowing the MD&C Committee to set performance criteria for payments, which may
not exceed the predetermined amount of 0.5% of the Company’s pre-tax income per participant. Our
performance share unit awards are also intended to meet the qualified performance-based compensation
exception under Code Section 162(m).
Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”), generally
provides that any deferred compensation arrangement which does not meet specific requirements will result in
immediate taxation of any amounts deferred to the extent not subject to a substantial risk of forfeiture. In general,
to avoid a Code Section 409A violation, amounts deferred may only be paid out on separation from service,
disability, death, a specified time or fixed schedule, a change-in-control or an unforeseen emergency.
Furthermore, the election to defer generally must be made in the calendar year prior to performance of services.
We intend to structure all of our compensation arrangements, including our Deferral Plan, in a manner that
complies with or is exempt from Code Section 409A.
We account for stock-based payments, including stock options and performance share units, in accordance
with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation.
The MD&C Committee takes into consideration the accounting treatment under ASC Topic 718 when
determining the form and amount of annual long-term equity incentive awards. However, because our long-term
equity incentive awards are based on a target dollar value established prior to grant (described in further detail
under “Named Executives’ 2011 Compensation Program and Results — Long-Term Equity Incentives”), this
“value” will differ from the grant date fair value of awards calculated pursuant to ASC Topic 718.
Risk Assessment. The MD&C Committee uses the structural elements set forth in the Executive Summary
above to establish compensation that will provide sufficient incentives for named executive officers to drive
results while avoiding unnecessary or excessive risk taking that could harm the long-term value of the
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