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Executive Compensation
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Elements of Executive Compensation
Base Salaries
As discussed above, the Compensation Committee or the Board (in
the case of the Chief Executive Officer) generally sets salaries within a competitive range between the 25th to the 75th percentile of salaries paid to comparable officers of companies in the peer group based on multiple factors, with a primary
focus on the 50
th
percentile of the peer group. These factors include the individuals prior performance, overall experience, tenure in position and impact on company results, current
comparison to benchmark position and an assessment of internal equity among peers.
For 2018, Mr. Almeida received a base salary of $1,300,000. Effective as of
February 24, 2018, the base salaries of each of the named executive officers (other than Mr. Almeida) were increased as part of the annual review process. As a result of these adjustments, salaries increased from (i) $687,000 to $710,000
(for Mr. Accogli), (ii) $660,000 to $673,000 (for Mr. Eyre), (iii) $620,000 to $635,000 (for Mr. Martin) and (iv) $700,000 to $717,000 (for Mr. Saccaro). For 2019, the base salaries for Messrs. Accogli, Eyre, Martin and Saccaro
have been increased to $735,000, $693,000, $651,000 and $739,000, respectively. As noted above, Mr. Almeidas base salary and the only component of his compensation that is not performance based, remained unchanged for 2019. Additionally,
Mr. Eyre will stop serving as an executive officer effective April 1, 2019.
Cash Bonuses
Cash bonus targets, like salaries, are set by the Compensation Committee (or the Board in the case of Mr. Almeida) within a competitive range generally between the
25th to the 75th percentile of the peer group, with a primary focus on the 50
th
percentile of the peer group. The same factors which influence the setting of salaries also impact the establishment
of cash bonus targets. Payouts under the cash bonus plan range from 0% to 250% based on a combination of company (0% to 200%) and individual performance (0% to 125%). In the event that an individual incurs a termination of employment on or after
July 1 of the performance year due to death or disability, the individual remains eligible for cash bonus program and the target amount will be prorated to reflect the number of full days of participation.
Target Setting
Cash bonus targets for all applicable named executive
officers are set within a range that is competitive with cash bonuses targets of comparable officers at companies in Baxters peer group (as in effect for the applicable period). The Compensation Committee has the discretion to further adjust
each officers cash bonus target as it deems appropriate. Typical reasons for adjusting cash bonus targets are experience, sustained individual performance, promotability and internal equity.
Determination of 2018 Annual Bonus Payouts
Based on the companys
performance against its 2018 financial targets, the bonus pool was funded at two times the base salary for each executive officer covered by the bonus pool (other than Mr. Almeida). For Mr. Almeida, the bonus pool was funded at two times
his target cash bonus in accordance with the terms of his offer letter. Application of the funding schedule associated with each metric resulted in an aggregate funding percentage of 137%, which the Compensation Committee approved as presented by
company management. The actual cash bonus paid to each named executive officer was calculated using the following formula: (x) such officers cash bonus target multiplied by (y) the companys aggregate performance across the
three applicable metrics (as discussed below). The Compensation Committee or the Board then had the ability to further adjust the resulting amount in light of the applicable officers individual performance for the relevant period, as discussed
below in Individual Performance.
Company Performance.
For 2018, Baxter performed relative to its adjusted EPS, net sales and free cash flow financial targets at 107.7%, 100.3% and 104.0%, respectively; provided that adjusted EPS and net sales performance for 2018 were
assessed as adjusted net sales and further adjusted EPS. This resulted in aggregate company performance of 137%. See Structure of Compensation ProgramFinancial Targets for a reconciliation of these
non-GAAP
financial measures to the closest GAAP measures.
Individual
Performance.
The goals for each Baxter named executive officer for 2018 reflect the responsibilities that are attributed to each of these officers. In evaluating each officers performance against
his goals, consideration was given not only to whether an objective was met, but also to how the objective was met.
The Compensation Committee believes that
the methodology it uses in paying cash bonuses is consistent with providing compensation that reflects how an officer is valued within the company and the marketplace. Based on the Compensation
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