Waste Management 2013 Annual Report Download - page 32

In furtherance of these goals, we experienced notably stronger free cash flow in 2013 when compared to
2012 due to improvements in cash flow from operations, primarily as a result of our pricing discipline. In 2013,
our internal revenue growth from yield was at its highest level for the year in the fourth quarter and greater than
2.0% for the full year for the first time since 2010. Our cash flow also benefitted from our increased focus on
capital spending management, and we continued to see the anticipated benefits from our cost savings programs,
including lower selling, general and administrative costs when compared to 2012. Further, we increased the
amount we returned to stockholders in 2013 compared to 2012 by increasing our dividend and repurchasing
shares. Our fourth quarter and full year results for 2013 laid a foundation that we expect will benefit us in 2014,
allowing us to focus on generating solid earnings and cash flow driven by increased yield and cost controls. The
Company also expects to continue to use free cash flow to pay dividends, repurchase shares, reduce debt and
make appropriate acquisitions and investments in the traditional solid waste business.
In line with the Company’s financial results, the following is a summary of the 2013 compensation program
results:
• after holding base salaries flat in 2012, the Company granted a three percent merit increase to base
salaries in 2013, with additional increases as necessary in limited cases to better reflect an executive’s
recent promotion and contribution.
• Company performance on annual cash incentive performance measures for named executive officers
exceeded the target level for each measure. As a result, each of the named executives received an annual
cash incentive payment for fiscal year 2013 equal to 153.7% of target.
• the Company generated a return on invested capital, for purposes of performance goals associated with
our performance share units (“PSUs”) granted in 2011, that was above threshold for the three-year
performance period ended December 31, 2013 but below target, resulting in a 60.45% payout on the
PSUs in shares of Common Stock.
The 2013 results continue to reinforce our emphasis on performance-based compensation. The MD&C
Committee strives to establish performance goals that are challenging, but attainable, and the MD&C Committee
remains dedicated to the principle that executive compensation should be substantially linked to Company
performance. 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 pay for performance.
Consideration of Stockholder Advisory Vote
The MD&C Committee established the 2013 compensation plan in early 2013, before the stockholder
advisory vote on executive compensation in May 2013. However, the MD&C Committee noted the results of the
advisory stockholder votes in May 2012 and May 2011, with 96% and 97%, respectively, of shares present and
entitled to vote at the annual meeting voting in favor of the Company’s executive compensation, and has since
noted the results of the May 2013 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.
2014 Compensation Program Preview
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 following elements for our
executive compensation program for 2014:
•Annual Cash Incentive Performance Measures: In 2014, we will retain the Income from Operations
Margin performance measure from the 2013 annual cash incentive program, and we have
reincorporated our prior Income from Operations excluding Depreciation and Amortization
performance measure; each of these two measures will be weighted 25%. We have revised the cost
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