Waste Management 2013 Annual Report Download - page 39

The following charts display the allocation of total 2013 compensation among base salary, annual cash
incentive at target and long-term incentives at target for (a) our President and Chief Executive Officer and (b) our
other named executives, on average. These charts reflect the MD&C Committee’s 2013 desired total mix of
compensation for named executives, which includes 48% of total compensation relating to long-term equity,
while long-term equity comprises approximately 69% of Mr. Steiner’s total compensation. These charts also
reflect that approximately 87% of Mr. Steiner’s target total compensation in 2013 was performance-based, while
approximately 74% of the target total compensation for 2013 for the other named executives was performance-
based. We consider stock options granted under our long-term incentive plan to be performance-based because
their value will increase as the market value of our Common Stock increases.
President and Chief Executive Officer Other Named Executives (on average)
Base Salary
Annual Cash
Incentive
Long-Term Equity
Incentive Awards
18.0%
68.7%
13.3%
26.1%
20.9%
53.0%
Base Salary
Annual Cash
Incentive
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 President and Chief
Executive Officer 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 per person paid in any year to our President and Chief Executive Officer and our other three
highest paid executives. “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 cash incentive 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 from operations 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 PSUs, in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation. The MD&C
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