Waste Management 2014 Annual Report Download - page 35

The following charts display the allocation of total 2014 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 currently-serving named executives, on average. These charts reflect the MD&C Committee’s 2014 desired
total mix of target compensation for named executives, which includes 56% of total compensation derived from
long-term equity awards, while long-term equity awards comprise 69% of Mr. Steiner’s total compensation.
These charts also reflect that approximately 87% of Mr. Steiner’s target total compensation opportunities
awarded in 2014 were performance-based, while approximately 76% of the target total compensation for the
other currently-serving 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 (currently serving, on average)
Base Salary
Annual Cash
Incentive
Long-Term Equity
Incentive Awards
17.8%
69.0%
13.2%
23.8%
19.8%
56.4%
Base Salary
Annual Cash
Incentive
Long-Term Equity
Incentive Awards
Internal Pay Equity. The MD&C Committee considers the differentials between compensation of the
named executive officers. The MD&C Committee also reviews compensation comparisons between the President
and Chief Executive Officer and the other executive officers, while recognizing the additional responsibilities of
the President and Chief Executive Officer and that such differentials will increase in periods of above-target
performance and decrease in times of below-target performance. Based on these considerations, the MD&C
Committee confirms that the compensation paid to the President and Chief Executive Officer is reasonable
compared to that of the other executive officers.
Policy on Calculation Adjustments. In 2014, the MD&C Committee adopted a policy on calculation
adjustments that affect payouts under annual and long-term incentive awards. Consistent with past practice, the
MD&C Committee reserves the right to adjust the results on performance measures used to determine annual and
long-term incentive plan payouts in order to eliminate the distorting effect of certain items. Such adjustments are
intended to align award payments with the underlying performance of the business; avoid volatile, artificial
inflation or deflation of awards due to unusual items in either the award year or the previous comparator year;
and eliminate counterproductive incentives to pursue short-term gains and protect current incentive opportunities.
To ensure the integrity of the adjustments, the MD&C Committee has adopted guidelines that are generally
consistent with the Company’s guidelines for reporting adjusted non-GAAP earnings to the investment
community, while retaining discretion to evaluate all adjustments, both income and expense, as circumstances
warrant. Additionally, the MD&C Committee has determined that potential adjustments arising from a single
transaction or event generally should be disregarded unless, taken together, they change the calculated award
payout by at least five percent.
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 intended 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
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