XM Radio 2014 Annual Report Download - page 37

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 believes that the amount of base
salary should be a relatively smaller portion of each named executive officer’s overall compensation
package, thereby aligning the interests of our executives more closely with those of our
stockholders.
Annual Bonus
The Compensation Committee may award annual bonuses in cash, restricted stock, RSUs,
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 2014
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 2014, 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 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. A more detailed
description of the methodologies used by the Compensation Committee to determine the bonus
amounts is discussed below under the heading “Payment of Performance-Based Discretionary
Annual Bonuses for 2014.”
The bonus awards to our named executive officers are described below under “Fiscal Year
2014 Pay Implications—Payment of Performance-Based Discretionary Annual Bonuses for 2014”
and are reflected in the Summary Compensation Table.
Long-term Incentive Compensation
The Compensation Committee grants long-term incentive awards to directly align compensation
for our named executive officers over a multi-year period with the interests of our stockholders by
motivating and rewarding actions that enhance long-term stockholder value, while also ensuring the
continued retention of our named executive officers. The Compensation Committee determines the
level of long-term incentive compensation in conjunction with total compensation provided to named
executive officers and the objectives of the above-described compensation program. Long-term
incentive awards have historically represented a significant portion of our named executive officers’
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