XM Radio 2010 Annual Report Download - page 33

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execution of the agreement), which vests generally over four years, subject to his continued employment. The
Compensation Committee determined that the increase in base salary and grant of options was appropriate in
light of Mr. Donnelly’s performance and necessary for us to retain and continue to properly incentivize him.
Overall Program Objectives and Processes
Program Objectives
We strive to attract, motivate and retain high-quality executives with the skills and experience necessary
to achieve our key business goals and enhance stockholder value by providing total compensation that is
largely performance-based and competitive with the various markets and industries in which we compete for
talent. We strive to provide incentives to align the interests of our executives with those of our stockholders
and deliver levels of compensation that we believe are commensurate with performance.
We achieve these objectives through three primary compensation elements:
• a base salary;
• a performance-based discretionary annual bonus that constitutes the short-term incentive element of our
program; and
• grants of stock options that constitute the long-term incentive element of our program.
The Compensation Committee believes that this three-part approach is consistent with programs adopted
by companies with which we compete for executive talent and best serves the interests of our stockholders.
The approach is an effort to meet the requirements of the competitive environment in which we operate, while
ensuring that executive officers are compensated in a manner that advances both the short- and long-term
interests of our stockholders.
The Compensation Committee believes that delivering compensation in the form of, or based on the value
of, our common stock promotes alignment between executive performance and stockholder interests. Accord-
ingly, the value of our common stock represents a large portion of our executives’ long-term compensation,
including through grants of stock options and matching contributions in the form of our common stock under
our Sirius XM 401(k) Savings Plan. Compensation for our executives also involves a high proportion of pay
that is “at risk” — namely, the discretionary annual bonus and the value of equity-based awards. This “at risk”
compensation is used to motivate executives to achieve goals and objectives that support our business plan and
align executives with the short- and long-term interests of our stockholders.
Total Compensation for Named Executive Officers
The Compensation Committee’s goal is to award compensation that incentivizes our named executive
officers to enhance value for our stockholders and is reasonable when all elements of potential compensation
are considered. In making decisions with respect to any element of a named executive officer’s compensation,
the Compensation Committee considers the total compensation that may be awarded to the officer, including
salary, annual bonus, long-term incentives, perquisites and other benefits. In addition, the Compensation
Committee considers the other benefits to which the officer is entitled under his or her employment agreement,
including compensation payable upon termination of employment (The named executive officers are employed
pursuant to agreements described under “Potential Payments upon Termination or Change-in-Control —
Employment Agreements” below.) In making its decisions regarding compensation for 2010, the Compensation
Committee reviewed as part of its decision-making process the total compensation potentially payable to, and
the benefits accruing to, each named executive officer.
Processes and Compensation Decisions
The Compensation Committee is responsible for developing and maintaining compensation programs for
our named executive officers. The Compensation Committee has strived to design these compensation
programs with great care, focusing first and foremost on the incentives that the programs promote. The
Compensation Committee is keenly aware of the heightened sensitivity that compensation programs have been
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