XM Radio 2013 Annual Report Download - page 34

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Executive Compensation Elements
Our practices with respect to the key compensation elements identified above, as well as other elements of
compensation, are described below, followed by a discussion of the specific factors considered in determining
the levels of these compensation elements for the named executive officers for 2013.
Base Salary
Base salaries for the named executive officers are determined consistent with the terms of their employment
agreements. The minimum amount of base salaries set forth in the employment agreements and any increases
over these amounts are determined by the Compensation Committee based on a variety of factors, including:
• the nature and responsibility of the position and, to the extent available and deemed relevant, salary
trends for persons in similar positions at comparable companies;
• the expertise, demonstrated leadership and management ability, and past performance of the individual
executive;
• the executive’s salary history and total compensation, including other cash bonus and stock-based
awards;
• the competitiveness of the market for the executive’s services; and
• the recommendations of our Chief Executive Officer (except as to his own compensation).
In setting base salaries, the Compensation Committee also considers the amount of base salary as a
percentage of total compensation with the goal that a substantial percentage of each executive officer’s total
compensation should be variable.
Annual Bonus
The Compensation Committee may award annual bonuses in cash, restricted stock, restricted stock units,
stock options or a combination thereof. The Compensation Committee believes that bonuses should take into
consideration all factors relevant to the Company’s and an executive’s performance, including numerous
financial and operational metrics, without being limited by a purely formulaic approach. None of our named
executive officers are entitled to a guaranteed or minimum bonus.
Consistent with prior years, the bonuses approved by the Compensation Committee for 2013 were intended
to achieve two principal objectives:
• to link compensation with performance that enhances stockholder value; and
• to reward our named executive officers based on individual performance and contributions to our
success.
To guide the Compensation Committee in determining bonus amounts for the named executive officers, in
2013, the Compensation Committee adopted a bonus plan that generally measures our performance using various
criteria, such as increases in subscribers, revenue, adjusted EBITDA and free cash flow. This plan does not
require the Compensation Committee to provide a guaranteed bonus or a minimum bonus to any of the named
executive officers. Rather, this plan is used by the Compensation Committee as one set of factors, along with
other financial and operational metrics that the Compensation Committee deems relevant, in evaluating and
benchmarking bonus amounts for the named executive officers.
The bonus awards to our named executive officers are described below under “Fiscal Year 2013 Pay
Implications — Payment of Performance-Based Discretionary Annual Bonuses for 2013” and are reflected in the
Summary Compensation Table.
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