Waste Management 2013 Annual Report Download - page 44

The remaining half of each named executive’s PSUs are subject to total shareholder return relative to the
S&P 500. The measure directly correlates executive compensation with creation of shareholder value. Total
shareholder return is calculated as follows: (Common Stock price at end of performance period – Common Stock
price at beginning of performance period + dividends during performance period) / Common Stock price at
beginning of performance period. The table below shows the required achievement of the total shareholder return
performance measure and the corresponding potential payouts under our PSUs granted in 2013.
Total Shareholder Return Relative to the S&P 500
Performance Payout
Top Quartile ................................. 150–200%
Second Quartile ................................. 100–150%
Median ................................. 100%
Third Quartile ................................. 50–100%
Bottom Quartile ................................. 0%
The different performance measure levels are determined based on an analysis of historical performance and
current projections and trends. The MD&C Committee uses this analysis and modeling of different scenarios
related to items that affect the Company’s performance such as yield, volumes and capital to set the performance
measures. As with the consideration of targets for the annual cash incentives, when the MD&C Committee
established the ROIC targets, the MD&C Committee carefully considered several material factors affecting the
Company for 2013 and beyond, including general economic and market conditions and economic indicators for
future periods, to ensure that the ROIC targets align with the Company’s long-range strategic plan. The table
below shows progress toward the ROIC performance measure and the corresponding payouts for the additional
PSUs that have been granted since 2010.
ROIC
Threshold Target Maximum Award Earned
2010 PSUs for period ended 12/31/12 .... 15.8% 17.6% 21.1% 62.94% payout in shares of Common
Stock issued in February 2013
2011 PSUs for period ended 12/31/13 .... 15.1% 17.8% 21.4% Performance on this measure of 15.16%,
or 85.17% of target, earned a 60.45%
payout in shares of Common Stock issued
in February 2014
2012 PSUs for period ended 12/31/14* . . . 15.0% 16.3% 18.2% Pending completion of performance
period
* These PSUs comprised 50% of all the PSUs granted to named executives in 2012; the remaining 50% are
discussed immediately below.
As in 2013, 50% of the PSUs granted in 2012 with a performance period ended December 31, 2014 are
subject to total shareholder return relative to the S&P 500. As of December 31, 2013, the performance of the
Company’s Common Stock on this measure translated into a percentile rank relative to the S&P 500 of 47.16%,
resulting in a projected 94.32% payout.
The MD&C Committee has discretion to make adjustments to the ROIC calculation for unusual or
otherwise non-operational matters that it believes do not accurately reflect results of operations expected from
management for cash incentive purposes. In February 2014, the MD&C Committee approved adjustments to the
calculation of results under the 2011 awards that had a performance period ended December 31, 2013. Net
operating profit after taxes used in the calculation of results was adjusted to exclude the effects of: (i) revisions of
estimates associated with remedial liabilities and adjustment of legal reserves; (ii) changes in ten-year Treasury
rates, which are used to discount remediation reserves; (iii) withdrawal from underfunded multiemployer pension
plans and labor disruption costs; (iv) charges related to acquisition and integration, and earnings on account of,
the acquired Oakleaf, Greenstar and RCI businesses; and (v) benefits from investments in low-income housing
and a refined coal facility on tax rates. Capital used in the calculation of results was adjusted to exclude the
impact of: (i) investments in a refined coal facility with associated tax credits and (ii) the purchase price for each
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