iRobot 2008 Annual Report Download - page 20

believe that the base salaries paid to our executive officers during our fiscal year 2008 achieve our executive
compensation objectives, compare favorably to our peer group and, in light of our overall compensation
program, are within our target of providing total compensation at the market median.
Cash Incentive Compensation. The compensation committee believes that some portion of overall cash
compensation for executive officers should be “at risk,” i.e., contingent upon successful implementation of our
strategy. For our named executive officers, including our chief executive officer, the granting of cash incentive
payments is based on an evaluation of achievement against predetermined financial and operational metrics in
accordance with our Senior Executive Incentive Compensation Plan that was adopted by the compensation
committee. Target cash incentives for named executive officers are generally targeted at the 50th percentile of
similar cash incentives provided to officers in peer companies reviewed by the compensation committee in the
technology and robotics industries. The amount of cash incentives paid to the named executive officers,
however, is subject to the discretion of the compensation committee based on its assessment of our
performance in general or the achievement of specific goals.
For fiscal 2008, the target bonus awards under our Senior Executive Incentive Compensation Plan for
each of our named executive officers, as a percentage of base salary, were 85% for our chief executive officer,
65% for our chief financial officer, 65% for the president of our Government & Industrial Robots division,
50% for our senior vice president and general counsel, and 25% for our vice president, financial controls and
analysis. In addition, the target cash incentive awards under our Senior Executive Incentive Compensation Plan
for our now departed officers, as a percentage of base salary, were 80% for our chairman and 40% for our
former chief financial officer. This target payout amount was set at levels the compensation committee
determined were appropriate in order to achieve our objective of retaining those executives who perform at or
above the levels necessary for us to achieve our business plan, which, among other things, involved growing
our company in a cost-effective way.
We designed our Senior Executive Incentive Compensation Plan to focus our executives on achieving key
corporate financial objectives and strategic milestones, and to reward substantial achievement of these
company financial objectives and strategic milestones. The performance goals and cash incentive payment
criteria established by the compensation committee under our 2008 Senior Executive Incentive Compensation
Plan were designed to require significant effort and operational success on the part of us and our named
executive officers for achievement. While the Senior Executive Incentive Compensation Plan is designed to
provide cash incentive payments based upon objectively determinable formulas that tie cash incentive
payments to specific financial goals and strategic milestones, the compensation committee retains the
discretion to adjust cash incentive payments under the Senior Executive Incentive Compensation Plan based
upon additional factors.
For each executive officer, except Mr. Leahy, 100% of his or her target cash incentive compensation in
2008 was tied to a company-wide revenue threshold. We had to achieve minimum revenue of approximately
$300 million for any portion of the cash incentive compensation to be accrued, with accrual increasing ratably
until we achieve revenue of approximately $311 million, at which 100% of the target cash incentive
compensation would have been accrued; provided, however, that the payment of such cash incentive
compensation was conditioned on our pre-tax net income as a percentage of revenue for fiscal 2008 remaining
above a pre-determined threshold of 2%. The compensation committee chose revenue achievement as a
primary determinant of cash incentive compensation because it believed that, as a “growth company,” we
should reward meaningful revenue growth. The compensation committee conditioned the payment of cash
incentive compensation on the achievement of a minimum level of pre-tax net income as a percentage of
revenue because it believed that we must balance our growth with a disciplined increase in profitability
designed to allow us to achieve our more long-term financial goals.
We achieved our revenue threshold for 2008, but because we did not achieve the minimum level of pre-
tax net income, the executive officers, except Mr. Leahy, did not meet performance thresholds under the
formula driven portion of the 2008 Senior Executive Incentive Compensation Plan. Nevertheless, based upon
its discretion under the 2008 Senior Executive Incentive Compensation Plan, the compensation committee
determined that cash incentive compensation should be paid based upon a number of factors including the
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