Waste Management 2014 Annual Report Download - page 30

Overview of Elements of Our 2014 Compensation Program
Timing Component Purpose Key Features
Current Base Salary To attract and retain executives
with a competitive level of
regular income
Adjustments to base salary primarily consider competitive
market data and the executive’s individual performance and
responsibilities.
Short-Term
Performance
Incentive
Annual Cash
Incentive To encourage and reward contributions to our annual
financial objectives through
performance-based
compensation subject to
challenging, yet attainable,
objective and transparent
metrics
Cash incentives are targeted at a percentage of base salary and
range from zero to 200% of target based on the following
performance measures:
• Income from Operations Margin – defined as Income from
Operations as a percentage of Revenue – motivates
executives to control costs and operate efficiently while
focusing on yield – weighted 25%;
• Income from Operations, excluding Depreciation and
Amortization – designed to encourage balanced growth
and profitability – weighted 25%; and
• Cost – defined as Operating Expense, less depreciation,
depletion and amortization, as a percentage of Net
Revenue – designed to support cost control and innovation
initiatives – weighted 50%.
The MD&C Committee has discretion to increase or decrease
an individual’s payment by up to 25% based on individual
performance, but such modifier has never been used to increase
a payment to a named executive.
Long-Term
Performance
Incentives
Performance
Share Units To encourage and reward building long-term stockholder
value through successful
strategy execution;
To retain executives; and
To increase stockholder
alignment through executives’
stock ownership
Number of shares delivered range from zero to 200% of the
initial target grant based on performance over a three-year
performance period.
Payout on half of each executive’s PSUs granted in 2014 is
dependent on cash flow generation, defined as cash provided by
operating activities with certain exclusions, which continues our
focus on capital discipline, while also aligning the Company
with stockholders’ free cash flow expectations.
Payout on the remaining half of the PSUs granted in 2014 is
dependent on total shareholder return (TSR) relative to other
companies in the S&P 500 over the three-year performance
period.
PSUs earn dividend equivalents that are paid at the end of the
performance period based on the number of shares actually
awarded.
Recipients can defer the receipt of shares, which are paid out in
shares of Common Stock, without interest, at the end of the
deferral period.
Stock
Options To support the growth element
of the Company’s strategy and
encourage and reward stock
price appreciation over the
long-term;
To retain executives; and
To increase stockholder
alignment through executives’
stock ownership
Stock options vest in 25% increments on the first two
anniversaries of the date of grant and the remaining 50% vest
on the third anniversary.
Exercise price is the average of the high and low market price
of our Common Stock on the date of grant.
Stock options have a term of ten years.
Post-Employment and Change-in-Control Compensation. The compensation our named executives receive
post-employment is based on provisions included in individual equity award agreements, retirement plan
documents and employment agreements. Our equity award agreements generally provide that an executive
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