To ensure the proper alignment of executive compensation practices with shareowner interests, annual disclosure of the following provisions, at a minimum, should be addressed:

1. Structure and Components of Total Compensation



1. Details should include reasonable ranges based on total compensation within which the company will target base salary as well as other components of total compensation. Overall targets of total compensation should also be provided.
   
   
2. Details should include how much of overall compensation is based on peer relative analysis and how much of it is based on other criteria.
   
   
2. Incentive Compensation
   


1. A significant portion of executive compensation should be comprised of "at risk" pay or tied to the attainment of achieving performance objectives.
   
   
2. The types of incentive compensation to be awarded should be disclosed.
   
   
3. Performance objectives²² should be set before the start of a compensation period while the previous years' objectives which triggered incentive payouts should be disclosed.
   
   
4. Plan design should utilize multiple performance metrics when linking pay to performance.
   
   
5. Meaningful performance hurdles that align the interests of management with long-term shareowners should be established with incentive compensation being directly tied to the attainment and/or out-performance of such hurdles²³.
   
   
6. Incentive compensation should include provisions by which "at risk" compensation will not be paid if performance hurdles are not obtained.
   
   
7. Provisions for the resetting of performance hurdles in the event that incentive grants are retested²⁴ should be disclosed.
   
   
8. Companies should develop and disclose a policy for recapturing incentive payments that were made to executives on the basis of having met or exceeded performance targets during a period of fraudulent activity or a material negative restatement of financial results for which executives are found personally responsible.
   
   
9. A process should be disclosed by which additional compensation for executives, which coincides with the sale or purchase of substantial company assets, can be ratified by shareowners.



Equity Compensation


1. Equity based compensation plans should incorporate the achievement of performance-based components that provide for the vesting of equity grants which include premium priced options, index-based options, and performance targets tied to company specific metrics that are required to achieve vesting. Time accelerated vesting is not a desirable performance based methodology.
   
   
2. In the event of a merger, acquisition, or change in control, unvested equity should not accelerate but should instead convert into the equity of the newly formed company.
   
   
3. Companies should develop and disclose a policy for recapturing dividend equivalent payouts on equity that does not vest.
   
   
4. Equity grants should vest over a period of at least three years
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5. The board's methodology and corresponding details for approving stock options for both directors and employees of the company should be highly transparent and include discloser of: 1) quantity, 2) grant date, 3) strike price, and 4) the underlying stock's market price as of grant date. The approval and granting of stock options for both directors and employees should preferably occur on a date when all corporate actions are taken by the board. The board should also require a report from the Chief Executive Officer stating specifically how the board's delegated authority to issue stock options to employees was used during the prior year.
   
   
6. Equity grant repricing without shareowner approval should be prohibited.
   
   
7. "Evergreen"²⁵ or "Reload"²⁶ provisions should be prohibited.
   
   
8. The company's philosophy related to how equity-based compensation will be distributed within various levels of the company should be disclosed.
   
   
9. Provisions for addressing the issue of dilution, the intended life of an equity plan, and the expected yearly run rate of the equity plan should be disclosed.
   
   
10. If the company intends to repurchase equity in response to the issue of dilution, the equity plan should clearly articulate how the repurchase decision is made in relation to other capital allocation alternatives.
    
    
11. All equity based compensation plans or material changes to existing equity based compensation plans should be shareowner approved.
    
    
12. Reasonable ranges within which the board will target the total cost of new or material changes to existing equity based compensation plans should be disclosed. The cost of new or material changes to existing equity based compensation plans should not exceed that of the company's peers unless the company has demonstrated consistent long-term economic out performance on a peer relative basis.
    
    
4. Use and Disclosure of Severance Agreements
   


1. In cases where the company will consider severance agreements²⁷, the policy should contain the overall parameters of how such agreements will be used including the specific detail regarding the positions within the company that may receive severance agreements; the maximum periods covered by the agreements; provisions by which the agreements will be reviewed and renewed; any hurdles or triggers that will affect the agreements; a clear description of what would and would not constitute termination for cause; and disclosure of where investors can view the entire text of severance agreements.
   
   
2. A definitive time frame in which the company will disclose any material amendments made to severance agreements should be disclosed.
   
   
3. Severance payments that provide benefits²⁸ with a total present value exceeding market standards²⁹ should be ratified by shareowners.
   


5. Use of "Other" Forms of Compensation
   


1. Compensation policies should include guidelines by which the company will use alternative forms³⁰ of compensation, and the relative weight in relation to overall compensation if "other" forms of compensation will be utilized.
   
   
2. To the degree that the company will provide other forms of compensation, it should clearly articulate its philosophy for utilizing these tools with specific treatment of how shareowners should expect to realize value from these other forms of compensation.
   


6. Use of Retirement Plans
   


1. Defined contribution and defined benefit retirement plans should be clearly disclosed in tabular format showing all benefits available whether from qualified or non-qualified plans and net of any offsets.

²² Performance objectives include, but are not limited to, Return on Invested Capital (ROIC), Return on Assets (ROA), and Return on Equity (ROE).

²³ Executive compensation should directly link the interests of senior management, both individually and as a team, to the long-term interests of shareholders. It should include significant performance-based criteria related to long-term shareholder value and should reflect upside potential and downside risk. (BRT Principles pg. 24)

²⁴ "Retested" means extending a performance period to enable initial targets to be achieved.

²⁵ Evergreen provisions provide a feature that automatically increases the shares available for grant on an annual basis. Evergreen provisions include provisions for a set number of shares to be added to the plan each year, or a set percentage of outstanding shares.

²⁶ Reload provisions allow an optionee who exercises a stock option using stock already owned to receive a new option for the number of shares used to exercise. The intent of reload options is to make the optionee whole in cases where they use existing shares they own to pay the cost of exercising options.

²⁷ Severance agreement means any agreement that dictates what an executive will be compensated when the company terminates employment without cause or when there is a termination of employment following a finally approved and implemented change in control.

²⁸ Severance benefits mean the value of all cash and non-cash benefits, including, but not limited to, the following: (i) cash benefits; (ii) perquisites; (iii) consulting fees; (iv) equity and the accelerated vesting of equity, (v) the value of "gross-up" payments; and (vi) the value of additional service credit or other special additional benefits under the company’s retirement system. Severance benefits do not include already accrued pension benefits.

²⁹ The disclosed threshold in the United States should not exceed 2.99 times the sum of the executive's base salary plus target bonus.

³⁰ "Other" forms of compensation include, but are not limited to, pension benefits including terms of deferred pay, perquisites and loans.