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Base Salaries
How do you determine base salaries, and what were the NEOs’ base salaries for 2014?
We determine base salaries for our executives based upon job responsibilities, level of
experience, individual performance and expectations with respect to contributions to our future
performance as well as comparisons to the salaries of executives in similar positions as compared to our
peer group. In April 2014, except for the CEO, the Committee increased the base salaries of our NEOs in
accordance with the factors identified in the preceding paragraph. The CEO’s salary did not change.
Effective as of April 1, 2014, the base salaries of our NEOs were as follows:
Name
Base Salary
Mark J. Gliebe
$ 925,000
Charles A. Hinrichs
$ 475,000
Jonathan J. Schlemmer
$ 575,000
Peter C. Underwood
$ 395,000
Terry R. Colvin
$ 345,000
The Committee compared these adjusted base salary levels to the salary levels of the executive
officers in our peer group based on proxy statement data as well as general industry data from Towers
Watson’s Executive Compensation Database. Compared to the median base salaries of similarly situated
executive officers in the data reviewed by the Committee, Mr. Gliebe’s salary for 2014 placed him 5%
below the median, and the salaries of Messrs. Hinrichs, Schlemmer, Underwood and Colvin for 2014
placed them 8% above, 4% below, 5% below and 3% below median, respectively. The base salary levels
set by the Committee did not affect decisions regarding other compensation elements.
Annual Cash Incentives
Do you provide annual cash incentive awards? If so, how are they structured?
We provide annual cash incentive awards through our SVA Cash Incentive Plan. “SVA” is a
calculation that attempts to approximate the value executives add to our company above our cost of
capital. SVA is calculated by subtracting a charge for the average net capital employed by us during a
fiscal year from the net operating profit after tax that we earn during that same year. The cost of capital
we use for this purpose is our weighted average cost of capital, which is determined based on our cost
of equity and our after‐tax cost of debt. Pursuant to the terms of the SVA Cash Incentive Plan, all
calculations of financial results for purposes of SVA exclude the impact of new acquisitions for the first
12 months following the closing of the acquisition. We chose SVA as the basis for annual cash incentive
awards because we believe it is the corporate performance measure that is tied most directly, both
theoretically and empirically, to the creation of shareholder value.
How does SVA work?
Each year, the Committee establishes an SVA target (the “Target SVA”) for the year. That target
is determined pursuant to a formula described below. Our executives earn annual cash incentives based