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What long‐term incentives were provided to NEOs in 2014?
In 2014, as in 2013, the Committee granted stock appreciation rights, or “SARs,” restricted stock
units, or “RSUs,” and performance share units, or “PSUs.” The proportion of overall long‐term incentive
target value represented by each form of award also remained the same, consisting of 40% SARs, 40%
RSUs and 20% PSUs. The Committee granted SARs, RSUs and PSUs to each of our NEOs in 2014 in the
amounts indicated in the “Grants of Plan‐Based Awards Table for Fiscal 2014” and the narrative
following the table. We value SARs using a Black‐Scholes formula and PSUs using a Monte Carlo
methodology. Consistent with our overall compensation philosophy, the Committee, after consultation
with Towers Watson, granted long‐term compensation awards in 2014 at levels approximating the
median level of these awards granted by the companies in our peer group. The target long‐term
incentive levels set by the Committee did not affect decisions regarding other compensation elements.
Award
Type
Description
Other
Vesting Period
SARs
The right to receive
stock in an amount
equal to the
appreciation in value of
a share of stock over the
base price per share.
The base price per share of all of the
SARs is equal to the closing market price
of our common stock on the date of
grant so that SARs will have value only if
the market price of our common stock
increases after the grant date.
The Committee granted SARs rather than
stock options because it views SARs as
less dilutive to our shareholders.
Five years (40% on the second
anniversary of the grant date and
20% on each of the third, fourth and
fifth anniversaries of the grant date)
RSUs
The right to have us
issue a share of our
common stock upon the
vesting date specified in
the award, if the
participant is still
employed by us at the
time of vesting.
In addition to providing competitive
compensation and an incentive to create
shareholder value, these awards are
intended to align management and
shareholder interests as well as provide
a retention incentive for the executive to
remain employed by our company.
Cliff vest on the third anniversary of
the grant date
PSUs
The right to have us
issue a share of our
common stock upon
achievement of the
performance conditions
specified in the award
The 2014 grants have a three‐year
performance period and will be earned
or forfeited based on a performance
metric of total shareholder return, or
TSR, relative to our peer group over our
fiscal years 2014‐2017.
For TSR at or below the 25
th
percentile of the peer group, no PSUs
will be earned. For TSR at the 50
th
percentile of the peer group, the
target number of PSUs will be
earned. For TSR at the 75
th
percentile of the peer group, the
maximum number of PSUs (which is
200% of the target PSUs) will be
earned. For performance between
the 50
th
and 75
th
percentile, the
number of PSUs earned is
interpolated between target and
maximum
In 2014, the Committee decided to modify the performance goal related to half of the PSUs to
be granted in 2015. In contrast to the PSUs granted in 2014, the 2015 PSUs will have two performance
metrics, TSR and adjusted operating profit margin rate. In the aggregate, the 2015 PSUs continue to
represent 20% of the overall long‐term incentive target value, with half of the 2015 PSUs being subject