Proxy Statement (definitive) (def 14a)
March 22 2013 - 6:01AM
Edgar (US Regulatory)
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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DIRECTV
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Table of Contents
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Notice of 2013 Annual Meeting of Stockholders
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Time and Date
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1:00 p.m. Eastern time on May 2, 2013
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Place
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Hilton Hotel New York
1335 Avenue of the Americas
New York, New York
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Items of Business
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1.
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Elect nominees to the Board of Directors, named and for the terms described in the attached Proxy Statement.
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2.
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Ratify the appointment of Deloitte & Touche LLP as independent registered public accounting firm for DIRECTV for the fiscal year ending December 31, 2013.
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3.
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Advisory vote to approve compensation of our named executives.
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4.
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Consider and act upon a shareholder proposal regarding a prohibition on the accelerated vesting of performance-based equity awards upon a change in control.
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5.
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Consider and act upon a shareholder proposal regarding a requirement that an independent board member be the chairman of the Company.
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6.
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Consider and act upon a shareholder proposal to grant a right to shareholders to act by written consent.
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7.
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Transact such other business as may properly come before the meeting.
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Record Date
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You can vote if you were a stockholder of record of DIRECTV Common Stock at the close of business on March 4, 2013. Each share of Common Stock is entitled to one vote for each nominated director and one vote for each of the proposals to be
voted on.
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Materials to Review
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Our proxy solicitation materials include:
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The Proxy Statement
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Your proxy card
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The Annual Report of DIRECTV to Stockholders for the Fiscal Year ended December 31, 2012.
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Proxy Voting
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It is important that your shares be represented and voted at the meeting. You can vote your shares by:
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Completing and returning your proxy card, or
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Voting online or by telephone (described in "How do I vote?" under "Proxy StatementQuestions and Answers").
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By order of the Board of Directors
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Corporate Secretary
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March 22, 2013
El Segundo, CA
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i
Table of Contents
DIRECTV
ii
Table of Contents
Proxy Summary
DIRECTV
2260 East Imperial Highway
El Segundo, California 90245
(310) 964-5000
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Proxy Statement
For the Annual Meeting of Stockholders
To Be Held May 2, 2013
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The
accompanying proxy is solicited by the Board of Directors of DIRECTV for use at our Annual Meeting of Stockholders (Annual Meeting) to be held at 1:00 p.m. Eastern time, on
May 2, 2013, at the Hilton Hotel New York, 1335 Avenue of the Americas, New York, New York, and any adjournment or postponement thereof.
On
or after March 22, 2013 we expect that this Proxy Statement and accompanying proxy card will be mailed or will be available through the Internet to stockholders of record of DIRECTV at the
close of business on March 4, 2013.
This
summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider before you decide how to vote your shares. You
should read the entire Proxy Statement carefully before voting.
Annual Meeting of Stockholders
Voting
Stockholders of record of DIRECTV Common Stock (Common Stock) as of the record date are entitled to vote. Each share of Common Stock
is entitled to one vote for each nominated director and one vote for each of the proposals to be voted on.
Admission
Please detach and retain the admission ticket attached to your proxy card. As capacity is limited, you may bring only one guest to the meeting.
If
you hold your stock through a broker, bank or other record holder, please bring evidence that you own Common Stock to the Annual Meeting and we will provide you with admission tickets.
If
you receive your Annual Meeting materials electronically and wish to attend the meeting, please follow the instructions provided for attendance. A form of government-issued photo ID will be
required to enter the Annual Meeting.
1
Table of Contents
DIRECTV
Meeting Agenda
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1.
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Elect
nominees to the Board of Directors, named and for the term described in the attached Proxy Statement.
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2.
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Ratify
the appointment of Deloitte & Touche LLP as independent registered public accounting firm for DIRECTV for the fiscal year ending
December 31, 2013.
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3.
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Advisory
vote to approve compensation of our named executives.
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4.
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Consider
and act upon a shareholder proposal regarding a prohibition on the accelerated vesting of performance-based equity awards upon a change in control.
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5.
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Consider
and act upon a shareholder proposal regarding a requirement that an independent board member be the chairman of the Company.
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6.
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Consider
and act upon a shareholder proposal to grant to shareholders a right to act by written consent.
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7.
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Transact
such other business as may properly come before the meeting.
Voting Matters and Vote Recommendation
For detailed information, refer to "Proposals for Stockholder Vote" beginning on page 87.
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Matter
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Board's Vote Recommendation
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Company Proposals
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1.
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Election of Directors
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FOR each nominated director
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2.
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Ratification of Deloitte & Touche LLP appointment
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FOR
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3.
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Advisory vote to approve executive compensation
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FOR
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Shareholder Proposals
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4.
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Prohibition on accelerated vesting of equity awards
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AGAINST
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5.
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Requirement that an independent board member be the chairman of the Company
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AGAINST
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6.
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Grant shareholders a right to act by written consent
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AGAINST
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Table of Contents
Proxy Summary
Our Nominees for Director
For detailed information, refer to "Director Biographical Information and Business Experience" beginning on page 87.
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Committee
Membership
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Name
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Age
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Director
Since
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Occupation
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Current Board
Member
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NCGC
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A
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C
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Neil Austrian
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2003
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Chairman and CEO, Office Depot, Inc.
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Yes
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Ralph Boyd, Jr.
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56
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2003
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Strategic Consultant and Interim President and CEO Center City PCS, Inc.
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Yes
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ü
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Abelardo Bru
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Retired Vice Chairman, Pepsico
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No
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David Dillon
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61
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2011
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Chairman and CEO, The Kroger Co.
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Yes
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Samuel DiPiazza, Jr.
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2010
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Vice Chairman, Institutional Clients Group, Citigroup, Inc.
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Yes
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ü
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Dixon Doll
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70
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2011
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Co-Founder and General Partner, DCM
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Yes
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Charles Lee
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73
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2003
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Retired Chairman and Co-CEO, Verizon Communications, Inc.
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Yes
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Peter Lund
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72
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2000
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Private Investor and Media Consultant Former President and CEO CBS, Inc.
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Yes
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Nancy Newcomb
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67
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2006
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Retired Sr. Corporate Officer, Citigroup, Inc.
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Yes
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ü
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Lorrie Norrington
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53
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2011
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Independent Advisor and Investor, Former President, eBay Marketplaces, eBay, Inc.
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Yes
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Michael White
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61
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2010
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Chairman, President and Chief Executive Officer
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Yes
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Key:
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NCGC=
Nominating and Corporate Governance
A=
Audit
C=
Compensation
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3
Table of Contents
DIRECTV
Business Highlights
For details, please refer to "2012 Business Results and Incentive Compensation Payouts" beginning on page 35.
In fiscal year 2012, we delivered strong financial and operating results and significant total shareholder returns, or TSR. Highlights
include:
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Revenueincreased 9% over 2011
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Operating profit before depreciation and amortization, or OPBDA, increased 8% over 2011
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Net incomeincreased 13% over 2011
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Earnings per Share or EPSincreased 32% over 2011
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TSRDIRECTV's TSR of 17.3% in 2012 outperformed the NASDAQ and S&P 500 indices
DIRECTV's
performance in 2012 capped a five-year trend of continuing improvement in our results and delivery of meaningful returns for our stockholders as indicated below:
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DTV TSR vs. S&P 500 and NASDAQ
Change in Stock Price or Index
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DTV TSR vs. Media and
General Industry Benchmark Companies
Change in Stock Price or Index
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Table of Contents
Proxy Summary
Executive Compensation Matters
For details, please refer to "Executive Compensation" beginning on page 28.
Pay is Based on Performance
Our compensation program allows our Compensation Committee and Board to determine pay based on a comprehensive review of quantitative
and qualitative factors intended to produce long-term business success. For our Chief Executive Officer, Michael White, almost 90% of his total direct compensation opportunity is
performance-based and for our other named executive officers, or NEOs, it is over 75%. We directly align Mr. White's and the other NEOs' compensation with shareholders' interests by awarding
approximately two-thirds of Mr. White's annualized compensation opportunity and about one-half of the other NEOs in a combination of stock options and performance-based
shares. The positive alignment between our financial results over multiple years, including total shareholder return, and the executive officer compensation earned for those results, demonstrates the
success of this approach, as described in the Compensation Discussion and Analysis beginning on page 28. Details of executive compensation are shown in the 2012 Summary Compensation Table on
page 54.
We Use Sound Program Designs
We believe that well-designed compensation programs allow us to attract, develop and retain executives who have the
experience, business judgment, vision and personal integrity to work well as a team to achieve results. We believe compensation that reflects performance and is aligned with the interests of
long-term stockholders contributes to our success.
Consequently,
we developed compensation programs to:
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Recruit and retain top executives
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Balance short-term and long-term goals and risk-to-reward relationships
that encourage increasing long-term stockholder value, and
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Pay for performance.
We
achieve our objectives through compensation that:
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Provides a competitive total pay opportunity
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Links a significant portion of total compensation to performance that we believe will
create long-term
stockholder value
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DIRECTV
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Consists of a substantial portion of stock-based compensation with stock ownership guidelines to further align the
executives' financial interests with stockholders
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Enhances retention by linking total compensation to multi-year performance, and
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Does not encourage unnecessary or excessive risk taking.
We Have Strong Governance Policies and Standards for Executive Compensation
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Independent Compensation Committee members
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Independent analyses and reviews by the Compensation Committee's independent consultant and
independent legal counsel
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Regular monitoring of Company performance
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Overlapping performance periods
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Performance measures aligned with long-term growth
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Checks and balances
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Delayed
payments after termination of employment to determine Company performance
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Significant stock ownership among our senior executives
Our Compensation Programs Emphasize a Long-Term View and Team Effort
We believe they:
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Foster rapid adjustment and adaptation to changing business conditions
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Help achieve our short-term and long-term goals
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Align the interests of our executives with those of our stockholders, and
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Provide a balanced and stable foundation for increasing stockholder value.
Our Board of Directors recommends that stockholders vote to approve, on an advisory basis, the compensation of the named executive officers.
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Table of Contents
Questions and Answers
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Questions and Answers About the
Annual Meeting and Voting
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Annual Meeting and Voting
Do I need a ticket to attend the Annual Meeting?
Yes. If you plan to attend the Annual Meeting, please detach and retain the admission ticket attached to your proxy card. As capacity
is limited, you may bring only one guest to the meeting.
If
you hold your stock through a broker, bank or other record holder, please bring evidence that you own DIRECTV Common Stock to the Annual Meeting and we will provide you with admission tickets.
If
you receive your Annual Meeting materials electronically and wish to attend the meeting, please follow the online instructions provided for attendance. A form of government-issued photo ID will be
required to enter the Annual Meeting.
Who is entitled to vote at the Annual Meeting?
The record date for the Annual Meeting is March 4, 2013. Stockholders of record and beneficial owners as of that date are
entitled to vote at the Annual Meeting. You are considered a stockholder of record if you hold Common Stock in your name in an account with DIRECTV's stock transfer agent, Broadridge Corporate Issuer
Solutions, Inc. (Broadridge). You are a beneficial owner if you hold Common Stock indirectly through a nominee, such as a broker, bank or similar organization.
Is there a list of stockholders entitled to vote at the Annual Meeting?
A complete list of stockholders entitled to notice of, and to vote at, the Annual Meeting will be open for examination by the
stockholders beginning 10 days prior to the
meeting.
In addition, for any purpose germane to the meeting, the list will be available during normal business hours at:
Office
of the Corporate Secretary
2260 East Imperial Highway
El Segundo, CA 90245
AND
One Rockefeller Plaza
New York, NY 10020
What kinds of securities are eligible to vote at the Annual Meeting?
DIRECTV has one class of outstanding stock entitled to vote at the Annual Meeting. Holders of Common Stock of DIRECTV, par value
$0.01, are entitled to one vote per share. At the close of business on March 4, 2013, there were 570,940,966 shares of Common Stock outstanding and eligible for voting at the Annual Meeting.
Will my vote be kept private?
Yes. DIRECTV believes your vote should be private and we use an independent specialist to receive, inspect, count and tabulate
proxies. DIRECTV has retained Broadridge for this purpose. A representative of Broadridge also acts as inspector of elections at the Annual Meeting.
How can I vote my proxy?
The Proxy Committee will vote the shares represented by a proxy unless the proxy card is received late or in a form that cannot be
voted.
Except
in the case of stock held in the DIRECTV 401(k) Stock Plan described below, by signing and returning the proxy card or by voting through the Internet or by telephone, you will authorize the
Proxy Committee to vote your shares of Common Stock on any matters that the Company does not know about now
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Table of Contents
DIRECTV
but
that may be presented properly at the Annual Meeting. The members of the Proxy Committee are Patrick Doyle and Larry Hunter.
Shares you hold as a stockholder of record
The form of proxy solicited by the Board of Directors allows you to:
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Vote for or against or abstain in the vote for each nominee for director in Proposal 1
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Approve, disapprove or abstain on each of
Proposals 2, 3, 4, 5 and 6.
For
any choice you indicate about any of these matters, your shares will be voted as specified. If you sign and return your proxy card without specifying a choice, the Proxy Committee will vote your
shares as the Board of Directors recommends in this Proxy Statement.
If
you receive more than one proxy card (which means you have shares in more than one account), you must mark, sign and date each of them or, alternatively, submit a proxy for all these shares through
the Internet or by telephone, as described below.
If
you are a stockholder of record you can vote in any one of the following ways.
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Internet:
Go to the Web site shown on your proxy card
(
www.proxyvote.com
). You will need to enter your voter control number that appears on your proxy card.
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Telephone:
Call the toll-free number listed on your proxy
card, (
1-800-690-6903)
. You will need to provide your voter control number that appears on your proxy card. Please
follow the instructions on your proxy card and the voice prompts on the telephone.
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Mail:
Mark your vote on the various matters, sign your name exactly as it
appears on your proxy card, date your proxy card and return it in the enclosed envelope.
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Ballot:
If you prefer, you may vote by ballot at the Annual Meeting
instead of using one of the above methods.
Shares held by a broker, bank or other record holder
If you are a beneficial owner, that is a broker, bank or other record holder (referred to as a nominee) holds your shares, please
refer to the instructions the nominee provides for your shares to be voted.
If
your shares are held by a broker, your broker must vote those shares in accordance with your instructions. If you do not give voting instructions to your broker, your broker may vote your shares
for you on any routine items of business voted upon at the Annual Meeting but may not vote on matters that are considered non-routine. Consequently, if you do not give voting instructions
to your broker, they will not vote your shares on non-routine matters.
See
"What is a broker non-vote?" and "What is a quorum for the Annual Meeting?" on page 9 for more information on how shares held by brokers or other nominees are voted.
Shares held In the DIRECTV 401(k) Stock Plan
If you participate in the DIRECTV 401(k) Stock Plan (Stock Plan), your proxy card will serve to instruct the Trustee of the Stock
Plan how to vote those shares. If you do not provide instructions on how to vote your shares held in the Stock Plan, those shares may be voted in the same proportion as the shares for which the
Trustee receives instructions from all other Participants, unless not otherwise permitted by law.
For
stock held through the Stock Plan, whether you submit a proxy for your stock by telephone, through the mail or by Internet, your directions must be received by Broadridge no later than
11:59 p.m., Eastern time on April 29, 2013. Please note that while you may attend the Annual Meeting, you may not vote stock held through the Stock Plan at the meeting.
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Table of Contents
Questions and Answers
Can I change my vote?
You may revoke your proxy at any time until it is voted at the Annual Meeting by:
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Sending a written notice of revocation to Broadridge, or
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Executing and delivering to Broadridge a subsequent proxy card, or
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Submitting a subsequent proxy through the Internet or by telephone, or by voting in person at the Annual Meeting.
What is a broker non-vote?
A broker non-vote occurs when a broker or other nominee does not receive voting instructions from the beneficial owner
and does not have the discretion to direct the voting of the shares.
If
you are a beneficial owner and do not provide voting instructions to your broker or other nominee, your broker or other nominee may exercise discretion in voting on routine matters but may not
exercise discretion and therefore will not vote on non-routine matters.
See
"What are the voting requirements for each of the Proposals discussed in this Proxy Statement?" below, for more information about matters considered routine and non-routine.
What is a quorum for the Annual Meeting?
A quorum consists of a majority of all of the outstanding shares of Common Stock entitled to vote at the meeting, present in person
or represented by proxy.
What are the voting requirements for each of the Proposals discussed in this Proxy Statement?
If there is a quorum present, each of the Proposals will be approved if it receives an affirmative vote of a majority of the shares
present, either in person or by proxy, that are eligible to vote.
Abstentions
and broker non-votes are counted differently, depending on the proposal, as described below.
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Proposal 1:
Election of Directors
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Non-routine
If you do not
provide voting
instructions, your
broker may not vote
on this matter
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Proposal 2:
Ratification of Appointment of Independent Registered Public Accounting Firm
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Routine
If you do not provide voting instructions, your broker is
permitted to exercise their discretion in voting
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Proposal 3:
Advisory Vote to Approve Executive Compensation
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Non-routine
If you do not
provide voting
instructions, your
broker may not vote
on this matter
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Proposal 4:
Shareholder Proposal Regarding a Prohibition on the Accelerated Vesting of Performance-Based Equity Awards upon a
Change in Control
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Non-routine
If you do not
provide voting
instructions, your
broker may not vote
on this matter
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Proposal 5:
Shareholder Proposal Regarding a Requirement that an Independent Board Member be the Chairman of the Company
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Non-routine
If you do not
provide voting
instructions, your
broker may not vote
on this matter
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Proposal 6:
Shareholder Proposal to Grant a Right to Shareholders to Act by Written Consent
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Non-routine
If you do not
provide voting
instructions, your
broker may not vote
on this matter
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9
Table of Contents
DIRECTV
Proposal 1: Election of Directors
The Company's Amended and Restated By-Laws (By-Laws), require that in uncontested elections each director
must be elected by a majority of votes cast for that director. For this Annual Meeting, the election of directors standing for election is uncontested. Therefore, the number of shares voted "for" a
nominated director must exceed the number of votes cast "against" that nominated director in order for that nominated director to be elected. Only votes "for" or "against" are counted as votes cast.
Abstentions and broker non-votes are not considered votes cast.
If
a nominated director who currently is serving as a director does not receive the affirmative vote of at least a majority of the votes cast, the Company's By-Laws provide that the
director must promptly tender his or her resignation to the Board after the stockholder vote has been certified. Pursuant to the By-Laws, within 120 days the directors (excluding
the
director who tendered the resignation) will decide whether to accept the resignation or whether other action should be taken, and publicly disclose their decision and rationale.
Proposals 2, 3, 4, 5 and 6
Each of Proposal 2, Proposal 3, Proposal 4, Proposal 5 and Proposal 6 will be approved if the proposal receives the affirmative vote
of a majority of the shares present and entitled to vote. Abstentions are effectively treated as a vote against each of Proposal 2, Proposal 3, Proposal 4, Proposal 5 and Proposal 6.
Although
the vote on compensation of our named executive officers is advisory only, the Compensation Committee will consider the results of the vote in its consideration of compensation of our named
executive officers. The Board has adopted a policy to hold advisory votes on the compensation of named executive officers every year.
Other Business Matters
The Board of Directors does not intend to present any business at the Annual Meeting other than the proposals described in this Proxy
Statement.
However,
if any other matter properly comes before the Annual Meeting, your proxies will act on such matter in their discretion as permitted.
Materials Related to the Annual Meeting
What materials will stockholders receive related to the Annual Meeting?
If you are a stockholder of record, the Annual Meeting materials you are entitled to receive
are:
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This Proxy Statement
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Your proxy card
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The Annual Report of DIRECTV to
Stockholders (Annual Report) for the Fiscal Year ended December 31, 2012.
Other
governance materials are available as described in "How can I get copies of governance materials?" on page 11.
What is meant by householding of Annual Meeting materials?
The SEC permits corporations to send a single copy of the Annual Report and Proxy Statement or Notice of Internet Availability of
Proxy Materials to any household at which two or more stockholders reside if it appears they are members of the same family. Each stockholder will continue to receive a separate proxy card. By use of
this procedure, referred to as householding, we can reduce the volume of duplicate information stockholders receive and can
reduce waste and expenses for the Company. DIRECTV has instituted this procedure for all stockholders of record.
10
Table of Contents
Questions and Answers
If
we sent only one set of these documents to your household and one or more of you would prefer to receive your own set, or if your household is receiving multiple sets of these documents and your
household would prefer to receive only one set, please contact Broadridge.
|
|
|
Telephone:
|
|
1-800-542-1061
|
|
|
|
U.S. Mail:
|
|
Broadridge Financial Solutions, Inc.
Householding Department
51 Mercedes Way
Edgewood, NY 11717
|
|
|
|
If you are a beneficial owner, please contact your nominee directly if you have questions, require additional copies of the Proxy Statement or Annual Report, or
wish to receive multiple sets of materials by revoking your consent to householding, or wish to only receive one set of materials.
Can I get my Annual Meeting materials electronically?
Yes. At your request, you will be sent an email when DIRECTV's Annual Report and proxy materials become available on the Internet. If
you are a stockholder of record, you may sign up for electronic delivery of these materials at
enroll.icsdelivery.com/dtv.
How can I get copies of governance materials?
Our governance materials are posted on our website at
www.directv.com/investor.
In
addition, stockholders may obtain paper copies of the following materials by sending a written request by first-class mail to:
DIRECTV
Attn: Corporate Secretary
2260 E. Imperial Highway
El Segundo, CA 90245.
Please
indicate specifically which documents you are requesting:
-
-
Annual Report
-
-
Third Amended and Restated Certificate of Incorporation (Certificate)
-
-
Amended and Restated By-Laws (By-Laws)
-
-
Charters of the Audit, Nominating and Corporate Governance and Compensation Committees
-
-
Corporate Governance Guidelines
-
-
Code of Ethics and Business Conduct
-
-
Code of Ethics Applicable to the Chief Executive Officer and Senior Financial Officers
-
-
DIRECTV's Employee Benefit Plans
Who will pay for the cost of this proxy solicitation?
DIRECTV will bear the expenses of printing and mailing this Proxy Statement and the costs for the solicitation of proxies. DIRECTV
will also request nominees holding Common Stock to send this Proxy Statement to, and obtain proxies from, the beneficial holders. If requested, DIRECTV will reimburse the record holders for their
reasonable out-of-pocket expenses. Solicitation of proxies by mail may be supplemented by telephone and Internet, advertisements and personal solicitation by the directors,
officers or employees of DIRECTV. No additional compensation will be paid to our directors, officers or employees for solicitation.
11
Table of Contents
DIRECTV
Corporate Governance Guidelines
DIRECTV's
Corporate Governance Guidelines discuss, among other things, the responsibilities of the Board, director qualification standards and Board independence criteria. Copies are available through
the sources listed under "How can I get copies of governance materials?" on page 11.
Code of Ethics
DIRECTV
has adopted a Code of Ethics and Business Conduct, which complies with the requirements of the NASDAQ Stock Market (NASDAQ) and a Code of Ethics applicable to the Chief Executive Officer and
Senior Financial Officers, which complies with the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. Required information regarding any amendment or waiver to the Code of Ethics
that would otherwise require DIRECTV to file a Current Report on Form 8-K pursuant to Item 5.05 shall instead be disclosed on DIRECTV's website within four business
days following the date of the amendment or waiver. You may access
DIRECTV's Code of Ethics through the sources listed under "How can I get copies of governance materials?" on page 11.
Directors
Selection of Directors
The Nominating and Corporate Governance Committee (NCGC) is responsible for reviewing with the Board, on an annual basis, the
appropriate skills and characteristics required of directors. While the NCGC has not established any specific minimum qualifications that a potential candidate must meet for nomination by the NCGC,
important qualifying factors are:
-
-
Level of education, and
-
-
Business or public service experience.
The
assessment process by the NCGC also includes consideration of the ability to bring:
-
-
Unique and fresh perspectives,
-
-
Diversity,
-
-
Specific technical or
business knowledge and expertise that might be beneficial to the Board, and
-
-
Experience on the boards or management of other major corporations.
The
NCGC also takes into account the need to have candidates with the required financial sophistication and expertise to satisfy the requirements to serve on DIRECTV's Audit Committee.
While
the Board and NCGC do not have a specific policy regarding the consideration of diversity in identifying director nominees, both the NCGC and the entire Board appreciate the value of diversity
among Board members. Diversity is an important element for the members of the NCGC in the identification and consideration of and deliberations regarding potential candidates for service on the
Company's Board. That consideration relates not only to race, gender and ethnic origin but also to diversity in education, business and life experience, and industry knowledge. The NCGC believes that
such diversity improves the quality of the Board's discussions and deliberations, brings fresh and differing perspectives that are valuable to DIRECTV's senior management, and helps assure that
diversity is a focus for the entire company. The NCGC conducts a formal diversity review of the Company every year and improving diversity within the Board and Company-wide will continue
to be an important goal for the NCGC.
Recommendations
for potential candidates may come from members of the Board of Directors or management of DIRECTV or stockholders, as discussed below. The
12
Table of Contents
Corporate Governance
Company
also has retained, and may retain in the future, an independent consultant that specializes in executive and director searches for major corporations. The NCGC typically bases
its review on any written materials provided on any candidate. The NCGC determines whether the candidate meets DIRECTV's general qualifications, assesses specific qualities and skills and determines
whether it is appropriate to request additional information or an interview. The independent consultant may assist in the review process by facilitating communications with candidates concerning their
interest in serving as a director and may help the NCGC to assess the fit of the individual with DIRECTV and its needs.
It
is the policy of the NCGC to consider recommendations for Board candidates submitted by stockholders using the same criteria it applies to recommendations from
directors
and members of management. Subject to limitations in the Company's Certificate and By-Laws, as each may be amended from time to time, and applicable law,
stockholders may submit recommendations in writing by:
|
|
|
Mail
|
|
Nominating and Corporate Governance Committee
c/o DIRECTV
Attention: Corporate Secretary
2260 East Imperial Highway
El Segundo, CA 90245
|
|
|
|
Fax
|
|
1-310-964-0843
|
To be considered by the NCGC for the 2014 Annual Meeting, recommendations for director nominees must comply with the requirements described in "Submission of
Stockholder Proposals" on page 112, unless otherwise required by law.
13
Table of Contents
DIRECTV
The
Board currently consists of 10 members. In 2012, average attendance at Board and meetings of the committees of the Board including the NCGC, the Audit Committee and the Compensation Committee was
93%. For 2012, each incumbent director attended more than 75% of the aggregate of Board meetings and committee meetings for committees on which the director served.
In
addition to being members of the Board, independent directors may serve on one or more of three standing committees of the Board. Please refer to "Committees of the Board of Directors" beginning on
page 19 for information about committee responsibilities and current membership. Directors spend a considerable amount of time preparing for Board and committee meetings and, from time to time,
may be called upon between meetings. The Board, and each committee, can retain outside advisors at the expense of the Company.
Independence of Directors
The
Company's Certificate requires that at least a majority of the Board of Directors be comprised of independent directors.
For
a director to be considered independent, he or she must qualify as an "independent director" under the rules and regulations of the NASDAQ in effect from time to time. The Board annually
makes a determination as to the independence of each of its members based on the NASDAQ criteria and any relationship that may exist between the Company or its suppliers and the director.
The
review by the Board to determine independence of its members includes consideration of, among other things, employment history, information publicly available from third party filings and
responses to questionnaires completed by each director on commercial, banking, professional, charitable, familial and other relationships. Each director has the opportunity to ask questions of any
member and to consider all relevant information. The Board conducts the review with the guidance of legal counsel on applicable standards and other relevant considerations.
Based
on a review by the Board of all relevant information, the Board has determined that there is no material relationship between the Company and each of Neil Austrian, Ralph Boyd, Jr., Abelardo
Bru, David Dillon, Samuel DiPiazza, Jr., Dixon Doll, Charles Lee, Peter Lund, Nancy Newcomb and Lorrie Norrington and that each is an independent director, or in the case of Mr. Bru as nominee
is independent, as defined by the Securities Exchange Act of 1934 as amended (Exchange Act) and the Corporate Governance Standards established by the NASDAQ.
Executive Session
At
each scheduled meeting of the Board, unless otherwise determined at the meeting, the independent directors meet in executive session without members of management present.
The
agendas and procedures for the executive sessions of the independent directors are determined by the Chairman of the NCGC, Neil Austrian, who presides at the executive sessions of the independent
directors.
14
Table of Contents
Composition of the Board
Board Leadership
The
Board of Directors does not have a policy regarding the separation of the roles of Chairman of the Board and Chief Executive Officer and believes it is in the best interests of the Company to make
that determination based on the position and direction of the Company and the membership of the Board. Currently, Michael White serves as Chief Executive Officer (CEO), President and Chairman of the
Board. The Board believes that this arrangement facilitates the organization and efficiency of the Board meetings over the calendar year by permitting the CEO to:
-
-
Develop a thoughtful and comprehensive agenda of the issues and matters most critical to the Company for review by the
Board, and
-
-
Guide the review process in a manner that will assure efficient use of the time available to the Board.
The
Company believes that this structure also makes the best use of the CEO's knowledge of the Company and the industry, as well as fostering greater communication between the Company's management and
the Board.
The
Board also believes that the composition of the Board, with nine of 10 current members qualifying as independent directors, together with the strength and experience of the individual Board
members, will assure that the Board continues to:
-
-
Fully perform its duties and independently identify and assess the most important areas concerning the business, and
-
-
Assess the
performance of the Company's senior management, including the CEO.
In
Neil Austrian, the Board has a strong lead director who, among other things, chairs meetings of the Board in the absence of the Chairman or when it is deemed appropriate in light of the Chairman's
management role. Further, Mr. Austrian chairs and sets the
agenda
for executive sessions of the independent directors, confers with the Chairman on the agenda, information flow and schedule of meetings, provides feedback to the Chairman on
corporate and Board strategies and, together with the Chairman of the Compensation Committee, oversees the evaluation of the CEO. The Board will revisit the Board leadership arrangement on an annual
basis.
Role of the Board in Risk Management
Risk
management is primarily the responsibility of the Company's management. However, the Board provides risk oversight to help assure that management has implemented processes to identify and manage
the most significant risks associated with the business of the Company. The Board uses various means to fulfill this oversight responsibility. The Board reviews the annual business plan and receives
updates on the results not less frequently than quarterly, which include the relevant risks, such as strategic, financial, operational and reputation risks, and the plans to address these risks. The
Board does not believe that its role in risk oversight has any meaningful impact on how the leadership of the Board should be structured.
Additionally,
an Enterprise Risk Management (ERM) program is in place that identifies significant risks, assigns executive management responsible for mitigating the risks, and provides regular
reporting to the Audit Committee and to the Board. The ERM program also assigns oversight for the risks to either the full Board or the appropriate Board committee depending on the nature of the risk.
Each committee monitors management in evaluating risks that fall within that committee's areas of responsibility. In performing this function, each committee has full access to management, as well as
the ability to engage advisors at the Company's expense.
15
Table of Contents
DIRECTV
For
information regarding the management of risk in connection with the compensation policies of the Company, please refer to "No Material Inappropriate Risks in Executive and Employee Compensation
Programs" on page 52.
In
addition, as part of the Corporate Audit and Assurance Annual Risk Assessment, the Audit Committee is provided with annual reports on key risk areas. The Company's Vice President, Corporate Audit
and Assurance, who functionally reports directly to the Audit Committee, performs this assessment and assists the Company to identify and assess risks as part of the ERM program. In connection with
its risk oversight role, at each of its meetings, the Audit Committee meets privately with representatives from the Company's independent public accounting firm and separately with the Company's Vice
President, Corporate Audit and Assurance.
Finally,
the Audit Committee provides oversight of the Company's culture and tone at the top through reports received on the Ethics/Whistleblower program as well as reports on the results of
Sarbanes-Oxley testing of Entity Level Controls. The Audit Committee provides periodic reports to the Board that include these activities.
Stockholder Communications with the Board
Stockholders
wishing to communicate with the directors may send a letter by regular or express mail addressed to the Corporate Secretary, DIRECTV, 2260 E. Imperial Highway, El Segundo, CA 90245,
Attention: Board of Directors. The Corporate Secretary will deliver all correspondence sent to that address to the directors on a quarterly basis, unless management determines in an individual
case that it should be sent more promptly. All correspondence to directors may also be forwarded within DIRECTV to an appropriate
subject
matter expert for review. Stockholder concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of DIRECTV's Corporate
Audit and Assurance function and handled in accordance with procedures established by the Audit Committee with respect to such matters, which include an anonymous toll-free hotline to
report such matters,
1-800-860-4031
.
Special
procedures have been established for stockholders and other interested parties wishing to communicate directly with Mr. Austrian as Chairman of the NCGC and as the lead director of the
independent directors or to the independent directors as a group. Such communications should be sent as provided above and addressed to the attention of the Corporate Secretary. DIRECTV will adhere to
the following procedures.
-
1.
-
Upon
receipt, the Corporate Secretary shall consult with the General Counsel to determine if the communication should be directed to DIRECTV's Chief Ethics
Officer for disposition in accordance with DIRECTV's Procedure for Handling Ethics Complaints (Ethics Procedure) or should be provided to the Chairman of the NCGC for disposition as provided below.
-
2.
-
Based
on the outcome of the above, the Corporate Secretary shall:
-
-
Provide the communication to DIRECTV's Chief Ethics Officer for processing in accordance with the Company's Ethics
Procedure and notify Mr. Austrian that she has done so, or
-
-
Provide the actual communication, or a summary thereof (as approved by the General Counsel), to Mr. Austrian.
-
3.
-
Following
receipt of any communication or summary, Mr. Austrian, in consultation with the General Counsel or independent legal counsel, as he deems
appropriate, will determine whether the communication or summary shall be given to all independent directors.
16
Table of Contents
Composition of the Board
-
4.
-
In
any case, the Corporate Secretary shall retain copies of all such communications and make such communications available to independent directors, or to
all directors, as directed by Mr. Austrian.
Annual Meeting Attendance
DIRECTV
does not require the attendance of directors at the Company's Annual Meeting. All the members of the Board of Directors of DIRECTV, as constituted at that time, attended the 2012 Annual
Meeting. The directors attending were Messrs. Austrian, Boyd, Dillon, DiPiazza, Doll, Lee, Lund, White and Mses. Newcomb and Norrington.
17
Table of Contents
DIRECTV
Director Information
The
current members of the Board of Directors of DIRECTV are set out in the table below (information as to age, position and committee membership is as of March 4, 2013, unless otherwise
noted).
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Committee Memberships
|
Neil Austrian
|
|
73
|
|
Chairman and Chief Executive Officer, Office Depot, Inc.
|
|
Nominating and Corporate
Governance (Chair)
Compensation
|
Ralph Boyd, Jr.
|
|
56
|
|
Strategic Consultant and Interim President and CEO Center City PCS, Inc.
|
|
Audit (Chair)
Nominating and Corporate Governance
|
David Dillon
|
|
61
|
|
Chairman and Chief Executive Officer, The Kroger Co.
|
|
Audit
Nominating and Corporate Governance
|
Samuel DiPiazza, Jr.
|
|
62
|
|
Vice Chairman, Institutional Clients Group, Citigroup, Inc.
|
|
Audit
Nominating and Corporate Governance
|
Dixon Doll
|
|
70
|
|
Co-Founder and General Partner, DCM
|
|
Compensation
Nominating and Corporate Governance
|
Charles Lee
|
|
73
|
|
Retired Chairman and Co-Chief Executive Officer, Verizon Communications, Inc.
|
|
Compensation (Chair)
Nominating and Corporate
Governance
|
Peter Lund
|
|
72
|
|
Private Investor and Media Consultant and former President and CEO CBS, Inc.
|
|
Audit
Compensation
Nominating and Corporate Governance
|
Nancy Newcomb
|
|
67
|
|
Retired Senior Corporate Officer, Citigroup, Inc.
|
|
Audit
Nominating and Corporate Governance
|
Lorrie Norrington
|
|
53
|
|
Independent Advisor and Investor, Former President, eBay Marketplaces, eBay, Inc.
|
|
Compensation
Nominating and Corporate Governance
|
Michael White, Chairman
|
|
61
|
|
Chairman, President and Chief Executive Officer
|
|
None
|
|
|
|
|
|
|
|
All of the Directors listed above have been nominated and are standing for election at the Annual Meeting. In addition, Abelardo Bru has been nominated for
election as a director at the Annual Meeting.
Your
proxy entitles you to vote only for the number of nominees who are standing for
election
at the Annual Meeting. That is, you are limited to voting for 11 nominees to the Board of Directors. You cannot vote for a greater number of persons. Biographical information
for each of the nominees for director is provided beginning on page 87.
18
Table of Contents
Composition of the Board
Committees of the Board of Directors
The
current charter of each of the committees described below is available through the sources listed under "How can I get copies of governance materials?" on page 11.
Nominating and Corporate Governance Committee
|
|
|
|
|
|
|
|
|
Membership of NCGC
|
Neil Austrian, Chair
|
Ralph Boyd, Jr.
|
|
Charles
Lee
|
David Dillon
|
|
Peter
Lund
|
Samuel DiPiazza, Jr.
|
|
Nancy
Newcomb
|
Dixon Doll
|
|
Lorrie
Norrington
|
|
|
|
The Nominating and Corporate Governance Committee (NCGC) currently has nine members, all of whom are independent directors as defined by NASDAQ. The NCGC met
three times in 2012.
The
NCGC is responsible for taking a leadership role in shaping the corporate governance of DIRECTV and is responsible for developing and recommending to the Board a set of corporate governance
guidelines applicable to DIRECTV and to periodically review and recommend changes to those guidelines
The
NCGC also conducts an annual review of the Company's Code of Ethics and Business Conduct and the Company's Code of Ethics applicable to the Chief Executive Officer and Senior Financial Officers.
It also researches and recommends candidates for membership on the Board, considers whether to nominate incumbent members for re-election, makes recommendations to the Board as to the
determination of director independence and recommends to the Board retirement policies
for
directors. The NCGC also makes recommendations concerning committee memberships, chairs and rotation, and sets the agendas for the executive sessions of the independent directors.
Audit Committee
|
|
|
|
|
|
|
|
|
Audit Committee Membership
|
Ralph Boyd, Jr., Chair
|
David Dillon
|
|
Peter
Lund
|
Samuel DiPiazza, Jr.
|
|
Nancy
Newcomb
|
|
|
|
The Audit Committee currently has five members all of whom are independent directors as defined by the NASDAQ. The Audit Committee met four times in 2012.
The
primary function of the Audit Committee is to assist the Board in:
-
-
Fulfilling its oversight responsibilities for the financial reports and other financial information provided by DIRECTV to
the stockholders and others
-
-
Evaluating DIRECTV's system of internal controls
-
-
Overseeing the Company's compliance
procedures for the employee code of ethics and standards of business conduct
-
-
Overseeing DIRECTV's audit, accounting and financial reporting processes generally, and
-
-
Reviewing and deciding upon proposed transactions with related parties.
Based
on the education, experience and offices held as described in more detail in the biographical information provided on each on pages 87-98, the Board has determined that each of
Messrs. Boyd, Dillon, DiPiazza and Lund and Ms. Newcomb are qualified to serve as the Audit Committee's financial experts and each satisfies the standard for "audit committee financial
expert" under the Sarbanes-Oxley Act of 2002.
19
Table of Contents
DIRECTV
Compensation Committee
|
|
|
|
|
|
|
|
|
Compensation Committee Membership
|
Charles Lee, Chair
|
Neil Austrian
|
|
Peter Lund
|
Dixon Doll
|
|
Lorrie Norrington
|
|
|
|
The Compensation Committee currently has five members. The Compensation Committee met five times in 2012.
The
Board has determined that each member is an independent, non-employee or outside director under applicable NASDAQ rules, Rule 16b-3 under the Exchange Act and
Section 162(m) of the Internal Revenue Code of 1986, as amended from time to time (the Code). Executive sessions without members of management present are held when appropriate and at least
once each year. The members of the Compensation Committee are not eligible to participate in any of the compensation plans or programs that the Committee administers, except for the standard
compensation received in connection with service on the Board and its committees.
The
Compensation Committee:
-
-
Sets the level of compensation of the CEO and the other elected officers of the Company, reviews and approves corporate
goals and objectives relevant to the compensation of the CEO and the other elected officers, and evaluates performance in light of those goals and objectives
-
-
Approves, amends and
oversees the administration of all plans, programs and other arrangements, designed and intended to
provide compensation primarily for executive officers
-
-
Recommends all equity-based plans for approval by stockholders and oversees their administration
-
-
Monitors compliance by executives
with the Company's stock ownership policy
-
-
Reviews the compensation levels and program designs for directors for service on the Board and its committees, and
recommends changes in such compensation
-
-
Evaluates the Compensation Committee's performance at least annually, and
-
-
Reviews
and approves the Compensation Discussion and Analysis and prepares the Committee's report to be included in the
Company's annual Proxy Statement.
The
Committee has engaged an independent compensation consultant and independent legal counsel. For more information, see "Independent Compensation Consultant" and "Independent Legal Counsel" on
pages 47 and 48.
The
Compensation Committee may delegate its authority to subcommittees or the Chairman of the Compensation Committee with the authority to act on the Compensation Committee's behalf. The Compensation
Committee has delegated authority for stock-based awards, other than awards to elected officers, to the Special 2010 Stock Plan Committee, which consists solely of the CEO, and, to administer legacy
stock plans, to a committee consisting of the CEO and the senior executive for Human Resources. The Committee has delegated authority to design and administer employee and executive benefit plans and
programs to two management committees, the Administrative Committee and the Investment Review Committee. The Committee provides oversight and
periodically reviews the actions of these subcommittees.
20
Table of Contents
Composition of the Board
Compensation Committee Interlocks and Insider Participation
During 2012, five persons, Charles Lee, Chair, Neil Austrian, Dixon Doll, Peter Lund and Lorrie Norrington served as members of the
Compensation Committee for the entire year.
Each
member of the Compensation Committee has been determined by the Board to be an independent director as defined in the By-Laws and the applicable rules of NASDAQ and none of them is or
has been a current or former officer or employee of the Company.
21
Table of Contents
DIRECTV
|
2012 Director Compensation
|
Summary of Changes in 2012
From
2009 through 2012, there have been no changes in the Board's compensation levels. Effective for 2013, the Board approved an increase to Board compensation as discussed below.
Compensation
The
two principal components of compensation for directors are (i) annual cash compensation for service on the Board and its committees and (ii) annual stock compensation for service on
the Board. Mr. White, who is an employee director, is not compensated as a member of the Board.
To
assist in determining the forms and levels of director compensation, the Compensation Committee engaged the same independent consultant that it uses for executive compensation.
Many
aspects of compensation for the Company's directors are similar to those of the executives:
-
-
Directors' compensation is evaluated annually and against the same media and general industry benchmark companies as the
named executive officers (the benchmark groups are discussed further at page 43)
-
-
Target levels of Board and committee compensation are approximately at the median for the benchmark
groups
-
-
Stock-based compensation is approximately 50% of total compensation
-
-
The directors are subject to a stock ownership
guideline.
For
2012, as part of the Compensation Committee's regular review of Board compensation, the Consultant prepared an assessment of Board compensation using 2011 proxy season data among the benchmark
media
and general industry companies. Based on this assessment, the Compensation Committee determined that there would be no changes in Board compensation for 2012.
For
2013, in a subsequent report from the Consultant based on 2012 proxy season data, the Compensation Committee determined that, among the benchmark companies, accumulated increases in Board
compensation over the past few years resulted in current Board compensation levels that were below the target median level for both the media and the general industry benchmark companies, while the
committee compensation levels remained near the target. The cash component of Board compensation was last increased in 2007, and the stock component in 2009. The Board approved a $15,000 increase to
annual Board compensation effective for 2013, with two-thirds of the increase or $10,000 allocated to the stock component, to emphasize the alignment with stockholders' interests, and
one-third or $5,000 allocated to the cash component. There were no changes to Committee compensation.
For
2012, the cash and stock compensation for the independent directors was:
Supplementary Chart 1Annual Board of Directors Compensation
|
|
|
|
|
Cash Board Compensation
|
|
$
|
80,000
|
Stock Board Compensation
|
|
$
|
120,000
|
Audit Committee Chair
|
|
$
|
30,000
|
Other Committee Chair
|
|
$
|
20,000
|
Audit Committee Member
|
|
$
|
15,000
|
Other Committee Member
|
|
$
|
10,000
|
|
The Company does not pay any compensation on a "per meeting" basis.
Independent
directors are reimbursed for related travel and director education expenses.
22
Table of Contents
Director Compensation
All
directors are eligible for complimentary DIRECTV programming. There are no benefit plans for directors, other than the savings plan described in this section (the DIRECTV Deferred
Compensation Plan for Non-Employee Directors). Directors are eligible to participate in the Charitable Gift Matching Program on the same basis as all employees. Directors are not eligible
to participate in any other compensation or benefit program provided for the Company's employees. Our Certificate and By-Laws provide for indemnification of the Company's directors and
officers
and we maintain director and officer liability insurance. In 2011, the Company entered into an indemnification agreement with each of the independent directors. The form of
agreement is the same for all independent directors and was attached as Exhibit 10.1 to the Form 8-K filed by DIRECTV with the SEC on August 4, 2011.
The
2012 Director Compensation Table and the notes following the table provide more information regarding director compensation.
2012 Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Fees earned or
paid in cash
($)
(b)
|
|
Stock Awards
($)
(c)
|
|
All Other
Compensation
($)
(d)
|
|
Total
($)
(e)
|
|
Neil Austrian
|
|
|
110,016
|
|
|
120,097
|
|
|
23,526
|
|
|
253,639
|
|
Ralph Boyd, Jr.
|
|
|
120,012
|
|
|
120,097
|
|
|
14,920
|
|
|
255,029
|
|
David Dillon
|
|
|
105,012
|
|
|
120,097
|
|
|
4,093
|
|
|
229,202
|
|
Samuel DiPiazza, Jr.
|
|
|
105,012
|
|
|
120,097
|
|
|
23,241
|
|
|
248,350
|
|
Dixon Doll
|
|
|
100,020
|
|
|
120,097
|
|
|
24,301
|
|
|
244,418
|
|
Charles Lee
|
|
|
110,016
|
|
|
120,097
|
|
|
23,947
|
|
|
254,060
|
|
Peter Lund
|
|
|
115,020
|
|
|
120,097
|
|
|
3,675
|
|
|
238,792
|
|
Nancy Newcomb
|
|
|
105,012
|
|
|
120,097
|
|
|
23,152
|
|
|
248,261
|
|
Lorrie Norrington
|
|
|
100,020
|
|
|
120,097
|
|
|
6,957
|
|
|
227,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
The amounts shown in column (b) represent the cash compensation paid to or contributed by the directors to the savings plan
described on page 24 during 2012.
Stock Compensation
The amounts shown in column (c) are the grant date fair value of stock compensation paid during 2012. The fair value on the
February 17, 2012 grant date was $44.98 per share, which is the closing price of the Common Stock on that date. The number of shares provided as stock compensation for the
year
was determined as $120,000 in target value divided by the closing stock price, and rounded up to the next higher 10 shares. This calculation resulted in a 2012 payment of 2,670
shares worth $120,097 on the grant date to each director.
The
Board's stock compensation program provides that a director who joins the Board after the Annual Meeting of stockholders will receive a prorated stock payment for the first year of service on the
Board. As of December 31, 2012, no director had an outstanding stock or stock option award.
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DIRECTV
Savings Plan
The independent directors are eligible to participate in a savings plan called the DIRECTV Deferred Compensation Plan for
Non-Employee Directors, which is a pre-tax savings plan subject to Section 409A of the Code. A director may elect to contribute any combination of cash or stock
compensation up to 100% or not to participate at all. Cash contributions are credited at the director's election either to an interest bearing account or converted to Restricted Stock Units (RSUs).
Interest on cash contributions is fixed annually and approximates 10-year Treasury Note rates and no portion of the interest is above market
rates.
Stock contributions are converted to RSUs with values that increase and decrease with the market value of the Common Stock. Directors elect to have account balances paid as a
lump sum or in up to 10 annual installments, beginning in the year following the year a director ceases to serve on the Board.
All Other Compensation
All other benefits earned or given to or on behalf of the directors (as shown in column (d) of the 2012 Director Compensation
Table above) are identified in Supplementary Chart 2 and the discussion following the Chart.
Supplementary Chart 2Board Of DirectorsAll Other Compensation
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Payments and Promises of
Payments Pursuant to
Director Legacy Programs
and Similar Charitable
Award Programs
($)
(b)
|
|
Other
($)
(c)
|
|
Total
($)
(d)
|
|
Neil Austrian
|
|
|
20,000
|
|
|
3,526
|
|
|
23,526
|
|
Ralph Boyd, Jr.
|
|
|
11,000
|
|
|
3,920
|
|
|
14,920
|
|
David Dillon
|
|
|
0
|
|
|
4,093
|
|
|
4,093
|
|
Samuel DiPiazza, Jr.
|
|
|
20,000
|
|
|
3,241
|
|
|
23,241
|
|
Dixon Doll
|
|
|
20,000
|
|
|
4,301
|
|
|
24,301
|
|
Charles Lee
|
|
|
20,000
|
|
|
3,947
|
|
|
23,947
|
|
Peter Lund
|
|
|
0
|
|
|
3,675
|
|
|
3,675
|
|
Nancy Newcomb
|
|
|
20,000
|
|
|
3,152
|
|
|
23,152
|
|
Lorrie Norrington
|
|
|
2,664
|
|
|
4,293
|
|
|
6,957
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and Promises of Payments Pursuant to Director Legacy Programs and Similar Charitable Award Programs
DIRECTV has long supported the communities in which its employees and customers live and work, and, in particular, has supported
educational institutions. As part of its community support, DIRECTV provides a Charitable Gift Matching Program for employees in which the Company matches
dollar-for-dollar
qualified gifts to non-profit organizations, up to $20,000 per participant per year. Management and directors are eligible to
participate on the same basis as employees. Eligible recipient organizations must operate on a not-for-profit basis and must conduct their giving in a country served by DIRECTV
US or DIRECTV Latin America. In the United States, they must be certified for tax-exempt status under Section 501(c)(3) of the Code. Organizations based solely outside
24
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Director Compensation
of
the U.S. must clear both the Patriot Act and OFAC terror watch lists to be eligible. We will not match contributions to institutions that restrict admission or aid due to race or
religious beliefs. We will match gifts to qualified institutions affiliated with religious organizations, but will not match gifts made directly to religious organizations. Charitable contributions
are shown in Supplementary Chart 2, column (b). Matching gifts on behalf of Mr. White are reported in column (h) of the 2012 Summary Compensation Table on page 54.
Other
Column (c) entitled "Other" represents the value of complimentary DIRECTV programming, a benefit that is provided to all
employees, management and directors. Each director is given complimentary DIRECTV service, which we report as a perquisite in the same manner as we report it for the named executive officers, as
described beginning on page 57.
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DIRECTV
The
names and ages of the executive officers of DIRECTV as of March 4, 2013, and their positions with DIRECTV are as follows:
|
|
|
|
|
Executive Officer
|
|
Age
|
|
Position
|
Michael White
|
|
61
|
|
Chairman, President and Chief Executive Officer
|
Joseph Bosch
|
|
54
|
|
Executive Vice President and Chief Human Resources Officer
|
Bruce Churchill
|
|
55
|
|
Executive Vice President, President of DIRECTV Latin America, LLC and PresidentNew Enterprises
|
Patrick Doyle
|
|
57
|
|
Executive Vice President and Chief Financial Officer
|
Larry Hunter
|
|
62
|
|
Executive Vice President and General Counsel
|
Romulo Pontual
|
|
53
|
|
Executive Vice President and Chief Technology Officer
|
Fazal Merchant
|
|
39
|
|
Senior Vice President and Treasurer
|
John Murphy
|
|
44
|
|
Senior Vice President, Controller and Chief Accounting Officer
|
|
|
|
|
|
The Board of Directors elected each of the above executive officers. Executive officers of DIRECTV serve at the discretion of the Board of Directors and may be
removed at any time by the Board with or without cause.
A
brief biography of each of the executive officers, except Michael White, follows. Mr. White's biography is under "Director Biographies and Business Experience" on page 98.
|
|
|
Biographies of Executive Officers
|
Joseph Bosch
|
|
Mr. Bosch has served as Executive Vice President and Chief Human Resources Officer of the Company since August 2010. Prior to joining the Company, Mr. Bosch served as Senior Vice President of
Human Resources for Centex Corporation from July 2006 to August 2009. Previously, Mr. Bosch served as Senior Vice President of Human Resources for Tenet Healthcare Corporation from August 2004 to June 2006. He served in a variety of senior human
resources management positions with Pizza Hut, Pizza Hut International and other Pepsi-Cola North America operations.
|
Bruce Churchill
|
|
Mr. Churchill has served as the Executive Vice President of the Company, President of DIRECTV Latin America LLC and as PresidentNew Enterprises since January 2004. He served as Chief
Financial Officer of the Company from January 2004 to March 2005. Prior to joining the Company, Mr. Churchill served as President and Chief Operating Officer of STAR, a position he held beginning in May 2000. Previously, he served as the Deputy
Chief Executive Officer of STAR since 1996. Prior to joining STAR, Mr. Churchill served as Senior Vice President, Finance at Fox Television.
|
|
|
|
Patrick Doyle
|
|
Mr. Doyle has served as Executive Vice President since October 2008 and as Chief Financial Officer since October 2007 when he was also appointed as Senior Vice President. Mr. Doyle also served as
Treasurer from February 2012 until July 2012. He served as Treasurer, Controller and Chief Accounting Officer of the Company from June 2001 to October 2007. He was appointed Corporate Vice President and Controller in July 2000 and Treasurer in June
2001. Previously, Mr. Doyle served as Vice President, Taxes from October 1996 to July 2000 and was given the additional responsibility of Corporate Development in June 1997.
|
26
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Executive Officers
|
|
|
Larry Hunter
|
|
Mr. Hunter has served as Executive Vice President and General Counsel of the Company since January 2004. He also served as Interim Chief Executive Officer from July 1, 2009 until
December 31, 2009. Mr. Hunter served as Senior Vice President from June 2001 to January 2004 and as General Counsel since December 2002. He was named Associate General Counsel in June 2001 and was named Corporate Vice President in August
1998. Mr. Hunter served as Chairman and Chief Executive Officer of DIRECTV Japan from 1998 to 2001. Mr. Hunter was assigned responsibility for overseeing the Human Resources and Corporate Communications departments in 2007, and the
Administration department in 2008, and retained those responsibilities until July 2010.
|
|
|
|
Romulo Pontual
|
|
Mr. Pontual has served as Executive Vice President and Chief Technology Officer of the Company since January 2004. Prior to joining the Company, Mr. Pontual served as Executive Vice President,
Television Platforms at News Corporation since 1996.
|
Fazal Merchant
|
|
Mr. Merchant has served as Senior Vice President and Treasurer since July 2012. Previously, Mr. Merchant served as managing director and group head at the Royal Bank of Scotland since 2011.
Prior to that, he spent seven years advising clients on strategy, financing, and risk solutions in the Investment Banking Division at Barclays Capital as managing director. He also spent nine years at Ford Motor Company in various treasury and
finance management positions across functions in the U.S. and Europe.
|
|
|
|
John Murphy
|
|
Mr. Murphy has served as Senior Vice President, Controller and Chief Accounting Officer of the Company since November 2007. He served as Vice President and General Auditor from October 2004 to
November 2007. Previously, Mr. Murphy served as Vice PresidentFinance and Emerging Businesses for Experian Group Ltd. Prior to that, Mr. Murphy was head of internal audit activities at International Rectifier, JDS Uniphase, and
Nestle USA. He began his career at PriceWaterhouse.
|
|
|
|
27
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DIRECTV
EXECUTIVE COMPENSATION
|
Compensation Discussion and Analysis
|
Introduction
This
Compensation Discussion and Analysis (CD&A) describes how the named executive officers (NEOs) were compensated in 2012. Under SEC rules, the NEOs are the Chief Executive Officer (CEO), the Chief
Financial Officer (CFO), and the three other most highly compensated elected officers. Mr. Palkovic was an elected officer of the Company through February 2012 and, under the SEC rules, is
included as a NEO.
|
|
|
Executive
|
|
Title
|
Michael White
|
|
Chairman, President and CEO
|
Patrick Doyle
|
|
Executive Vice President (EVP) and CFO
|
Bruce Churchill
|
|
EVP and President of DIRECTV Latin America, LLC and New Enterprises
|
Larry Hunter
|
|
EVP and General Counsel
|
Michael Palkovic
|
|
EVP, Operations
|
Romulo Pontual
|
|
EVP and Chief Technology Officer
|
|
The
CD&A and related information regarding compensation of the named executive officers are organized into five sections:
|
|
|
Section
|
|
Page
|
1. Executive Summary
|
|
28
|
2. 2012 Business Results and 2012 Incentive Program Payouts
|
|
35
|
3. Compensation Program Objectives and Components of Pay
|
|
41
|
4. Policies, Guidelines and Practices Related to Executive Compensation
|
|
47
|
5. 2012 Summary Compensation Table and Related Tables
|
|
54
|
|
This
CD&A has been reviewed by and approved for inclusion in this Proxy Statement by the Compensation Committee. Although this CD&A expresses the views and input of both the Committee and management
of the Company, references to "we," "us" and "our" refer to the Company.
1. Executive Summary
DIRECTV
(NASDAQ: DTV) is one of the world's leading providers of digital television entertainment services delivering a premium video experience through
state-of-the-art technology, unmatched programming and
industry
leading customer service to more than 35 million customers in the U.S. and Latin America. In the U.S., DIRECTV offers its more than 20 million customers access
to more than 185 HD channels and Dolby-Digital® 5.1 theater-quality sound, access to exclusive sports programming such as NFL SUNDAY
28
Table of Contents
Executive Compensation: Compensation Discussion and Analysis
TICKET,
Emmy-award winning technology and higher customer satisfaction than the leading cable companies for 11 years running.
The
DIRECTV entertainment experience includes innovative services like DIRECTV Everywhere that allows customers to watch shows and movies anytime, anywhere, on their TV, laptop, tablet, and cell
phone. Hollywood blockbusters and hit shows are available on demand wherever customers are and they can also stream live TV on their iPad® and iPhone® anywhere in their home
(select channels are available even outside the home). And Genie, the most advanced HD DVR receiver, enables the viewer to enjoy a full HD DVR experience on every TV in their home.
DIRECTV
Latin America, through its subsidiaries and affiliated companies in Brazil, Mexico, Argentina, Venezuela, Colombia, and other Latin American countries, is a leader in the pay TV category in
technology, programming and service, delivering an unrivaled digital television experience to more than 15 million customers.
DIRECTV
sports and entertainment properties include three Regional Sports Networks (Northwest, Rocky Mountain and Pittsburgh) as well as a 42 percent interest in Game Show Network.
DIRECTV
is a large and complex international company with diverse customers and employees. So it is critical we have well-designed compensation programs to assemble and retain an executive
management team that has the experience, business judgment, vision and personal integrity to work well as a team and achieve results. Consequently, we developed compensation programs to support the
following objectives:
-
-
Recruit and retain top executives
-
-
Balance short-term and long-term goals and risk-to-reward relationships
that encourage increasing long-term stockholder value, and
-
-
Pay for performance.
In
this section, Supplementary Charts 3 and 4 show our excellent investment return to shareholders over the past five years as compared to our benchmark companies in media and general industry.
We also show that:
-
-
Our performance and the NEOs' pay are well aligned
-
-
Our NEOs' pay is substantially based on performance and our bonus and
stock award plans use
objective, formula-based performance measures
-
-
NEOs hold significant amounts of stock and meet our stock ownership
guidelines
-
-
We have strong governance policies and standards for executive
compensation
Executives' Performance and Pay are Aligned
Our long-term performance and executives' pay are well aligned. In an independent study using total shareholder return
(TSR) and other measures to evaluate the alignment between our TSR performance and our pay for that performance compared to our benchmark companies, our TSR was in the top 25% compared to our
benchmark groups for the 5 years ending December 31, 2011, while our realizable pay was around the median of our benchmark groups. At the time of the study, 2012 compensation data had
not been reported for most companies.
Annual
TSR is the percentage change in the closing stock price from December 31 of one year to December 31 of the next year, with appropriate adjustment for dividends.
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DIRECTV
DIRECTV's
117% total shareholder return or TSR outperformed the S&P 500, the NASDAQ Composite Index, and the median TSRs among our media and general industry benchmark companies for the
5 years ending December 31, 2012.
In
2008 and 2009, during the downturn in the economy, DIRECTV successfully avoided the volatility and losses in the stock markets in general and DIRECTV's 44% TSR outperformed the NASDAQ and
S&P 500 indices and our benchmark companies' median TSRs, all of which lost value. During the past 3 years, 2010 through 2012, DIRECTV continued to outperform these comparators with a
50% TSR, except for the media group.
For
the full 5-year period, DIRECTV's 117% TSR significantly outperformed these broad market indices and the median TSRs for both benchmark groups.
|
|
|
|
|
|
Supplementary Chart 3
DTV TSR vs. S&P 500 and NASDAQ
Change in Stock Price or Index
|
|
Supplementary Chart 4
DTV TSR vs. Media and
General Industry Benchmark Companies
Change in Stock Price or Index
|
|
|
|
|
|
|
Pay is Based on Performance
Our principal pay programs are: (i) a base salary, (ii) an annual cash bonus for execution against our annual
performance goals, and (iii) a long-term performance program that focuses on the Company's performance over multiple years and growth in the stock price.
30
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Executive Compensation: Compensation Discussion and Analysis
Supplementary
Chart 5 illustrates the relative weighting of the principal pay elements of 2012 target pay opportunity for the CEO and for the other NEOs as a group.
Supplementary Chart 52012 Executive Officer Compensation Opportunity
|
|
|
CEO 2012 Compensation Opportunity
|
|
All Other NEOs as a Group
2012 Compensation Opportunity
|
Long-term stock-based incentives are about 3 times the weight of the annual bonus incentives.
|
|
Long-term stock-based incentives are about 2 times the weight of the annual bonus incentives.
|
|
|
|
-
-
Mr. White's annualized compensation is about 90% performance-based and, for the remaining NEOs, about 75% of their
principal pay is performance-based.
-
-
Pay levels are targeted to pay between the media and the general industry benchmark groups median compensation levels if
we achieve annual performance targets. Actual pay depends on how well we achieve the performance goals and on increasing the stock price.
One-Year 2012 Performance and Bonuses
The NEO's bonuses are based on attaining performance goals for cash flow before interest and taxes (CFBIT) as the maximum bonus
payable for each NEO. We then evaluate other objective, formulaic measures of growth in operating or financial metrics such as revenue, pre-SAC margins, OPBDA and net subscribers, and the
NEO's performance in areas such as strategic transformation of the Company and talent and teamwork to determine if the maximum bonus or a lesser amount should be awarded.
For
2012, the Committee determined that the CEO earned a 128% bonus, while the other NEOs' bonuses averaged 110% of their respective target bonuses.
Three-Year 2010-2012 Performance and Stock-Based Awards (RSUs)
The performance-based stock program focuses on our sustained performance over multiple years and the achievement of
long-term financial goals, as well as growth in the stock price.
For
the 2010-2012 performance period, the Committee set quantitative performance standards for growth in revenue, cash flow before interest and taxes (CFBIT), and earnings per share (EPS).
Over
the past three years, revenue grew over $8 billion or 38%, CFBIT grew over $1 billion or 37% and EPS grew over $3 per share.
Over
the same 3 years, our stock price and TSR grew approximately 50%.
As
a result, the NEOs earned 125% of the three-year (2010-2012) performance-based RSU target award.
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DIRECTV
Mr. White's
2010-2012 performance RSU award was also approved at 125% of the target shares based upon attaining the same performance standards as the other NEOs. The final award
value for Mr. White was $26.8 million based on the $49.19 per share closing stock market price on February 15, 2013. This 2010-2012 RSU award was a single performance
RSU award for the 3-year term of Mr. White's 2010 Employment Agreement and he was not awarded any additional RSUs in 2011 or 2012. Mr. White's RSUs were not distributed, but
were deferred under a previous election; see the discussions following the 2012 Option Exercises and Stock Vested Table on page 65 and the 2012 Non-Qualified Deferred Compensation Table on
page 70.
Significant Stock Ownership
Executive stock ownership aligns the interests of executives and shareholders and focuses the executives on long-term
success. Under our stock ownership guidelines as of February 2013:
-
-
Mr. White holds over $41 million in stock and has attained the target ownership level; during 2012,
Mr. White's stock ownership increased by retaining net shares received from stock option exercises and retaining (through deferral) shares earned from his 2010 Performance Stock Unit Award.
-
-
The five other NEOs hold over $23 million in stock and have attained the target ownership level.
Strong Governance Policies and Standards for Executive Compensation
-
-
Independent Compensation Committee members
-
-
Independent analyses and reviews by the Compensation Committee's independent compensation
consultant
-
-
Regular monitoring of Company performance
-
-
Overlapping performance periods
-
-
Performance measures aligned with long-term growth
-
-
Checks and balances
-
-
Delayed payments to determine Company performance after termination of employment
-
-
Significant stock ownership among our senior
executives
Other Key Events in 2012
New CEO Employment and Compensation Arrangements
Mr. White had an employment agreement for the three-year period ended January 1, 2013. During 2012 and
continuing through the Committee meeting on November 1, 2012, the Committee met and considered key compensation and governance issues before developing the CEO's new employment arrangements.
The Board of Directors and Mr. White agreed that both parties were committed to Mr. White continuing as DIRECTV's Chairman, President and Chief Executive Officer. The Committee's primary
objective was to continue the strong alignment of the CEO's compensation with Company performance and shareholder interests.
During
this period, the Committee evaluated alternative approaches against its compensation philosophy, sought the views of other Board members, and discussed objective analyses and points of view
from its independent compensation consultant and its independent legal counsel. Among the reviews were analyses of pay levels and compensation arrangements of CEOs in our benchmark group of companies
in the media benchmark group and separately in the general industry benchmark group (see page 43). The Committee also reviewed reports issued by governance advisors on the structure and
alignment of our pay programs with shareholder interests, particularly the CEO's pay.
CEO Performance
The Committee considered Mr. White's past performance and his commitment to continue as CEO as the basis for the framework developed for his
future compensation.
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Executive Compensation: Compensation Discussion and Analysis
Compensation Philosophy
The Committee designed the employment and compensation arrangements to be consistent with our compensation philosophy to retain
top-performing executives, pay for performance, balance short-term and long-term goals and risk-to-reward relationships that encourage
increasing long-term shareholder value, and align with shareholders' interests.
No Employment Contract
The Committee had previously decided to phase out employment contracts among the top executives, even though employment contracts are
frequently used in the media and entertainment sector. Mr. White also agreed to forego a new contract and serves at the Board's discretion after his prior contract lapsed on January 1,
2013.
New Compensation Arrangements
At the end of its discussions, the Committee determined that the following elements would meet its
objectives:
-
(i)
-
a
base salary increase to the current market average for the media benchmark group,
-
(ii)
-
a
significant initial equity award in the form of a stock option grant vesting in three years,
-
(iii)
-
continued
performance-based annual bonuses, as well as annual performance-based equity awards (a change from the single three-year equity
awards to the Chief Executive Officer in 2004, 2007 and 2010),
-
(iv)
-
continued
annual reviews of performance and total compensation, and
-
(v)
-
a
CEO Severance Plan.
As
part of the new compensation arrangements, Mr. White's annual base salary increased to $1.7 million in 2013, which is about average among CEOs in our media benchmark group.
His
annual performance bonus remains targeted at 200% of base salary (unchanged since 2010) or $3.4 million for 2013. The actual amount of Mr. White's annual bonus will be based on
achieving Company and individual
performance
goals set by the Committee and the Board each year, consistent with the bonus program for other senior executives.
The
Committee intends that a large proportion of Mr. White's pay will continue to be in the form of equity awards to continue to align his compensation with shareholder interests. Consequently,
the Board approved a $12 million stock option award effective in November 2012, which is scheduled to vest on December 31, 2015, after three years of continued service.
Annual Equity Awards
For 2013, the Committee took into account the $4 million annualized value of the November 2012 stock option award
(one-third of $12 million) and awarded $6 million in equity for 2013 in the form of stock options ($1.5 million) and performance-based RSUs ($4.5 million). The
stock options vest annually at the rate of one-third of the original award each December 31, 2013, 2014 and 2015. The performance-based RSUs are subject to the same
2013-2015 performance metrics as the other NEOs.
For
2013, the $6 million stock option and performance RSU award when combined with the $1.7 million base salary, the $3.4 million target performance bonus, and the
$4 million annualized 2012 stock option award, provide a 2013 target total direct compensation opportunity valued at $15.1 million, which is about average for CEOs in the media benchmark
group. The actual value earned from the bonus, stock option and performance RSU awards will be based on company and individual performance and stock price gains or losses.
Annual Performance and Pay Reviews
The Committee will continue to review Mr. White's pay each year, using the same pay evaluation process it uses for the
Company's other senior executives. This annual review process includes: (i) independent analysis of pay among our benchmark companies; (ii) internal pay comparisons; (iii) company
performance;
33
Table of Contents
DIRECTV
and
(iv) individual performance. It is intended that a high proportion of Mr. White's pay will continue to be performance-based and payable in shares of common stock,
which aligns his compensation with shareholder interests.
New Severance Arrangements
Mr. White participates in a severance plan that is generally consistent with the Executive Severance Plan announced in 2012 for
other senior executives. See Potential Payments upon Termination or Change in Control on page 72 for more information.
Positive 2012 Say-on-Pay Advisory Vote
We value the opinions of our stockholders and in 2012 we asked our stockholders to express their views on our NEOs' compensation in
an advisory vote.
At
the Annual Meeting, the final vote was 98% "for" and 2% "against" (excluding abstentions and broker non-votes).
This
vote was not intended to address any specific item of compensation, but rather the overall compensation of the NEOs and the philosophy, policies and practices described in the 2012 Proxy
Statement.
We
believe that the positive shareholder vote affirms our past practices of thoughtfully designed programs and appropriate use of objective quantitative and qualitative performance measures and our
judgment to evaluate performance and determine appropriate payment for that performance.
In
light of the Company's solid financial performance and the continuing success of our compensation program, the Compensation Committee concluded that the compensation program continues to provide a
competitive pay-for-performance package that effectively incentivizes executives and retains them for the long term. Thus, the Committee made no significant changes to the
program during the year. We will continue to monitor stockholders'
input
as we adapt our compensation programs to support our success in the Company's highly competitive business environment.
Phase-Out Employment Agreements
Our practice since 2004 has been to execute employment agreements with our senior executives. This practice is common in the media
benchmark group. In 2011, after careful consideration, we began an orderly phase-out of these agreements. After each current employment agreement expired, each executive would continue
their employment "at will" without a new agreement. This phase out was completed in 2013. We currently do not intend to enter into new employment agreements unless, as a result of special or changed
circumstances, we determine it is in the best interests of the Company and our stockholders to do so.
As
previously noted, Mr. White agreed to forgo an employment agreement when his initial agreement expired on January 1, 2013. In February 2013, Mr. Palkovic voluntarily agreed to
early cessation of his employment agreement.
Currently,
no NEO has an employment agreement.
Severance Plans
We adopted a CEO Severance Plan in 2012 and the Executive Severance Plan in 2012 to provide a pre-determined basis for
settling compensation and benefits upon termination of employment for various reasons, such as resignation or retirement. In particular, following an executive's involuntary termination (other than
for cause), we believe that these plans provide for rapid transition out of the Company that is appropriate for the executive and consistent with the objectives of the Company's compensation programs.
The severance arrangements include restrictions not to compete with the Company and not to solicit employees to leave the Company. We consider the value of these restrictions when
34
Table of Contents
Executive Compensation: Compensation Discussion and Analysis
determining
the levels of post-employment compensation. There are no tax gross-ups. For additional information about the severance plans, see the discussion
beginning on page 44.
Stock Options
For several years, only the CEO was granted stock options as part of long-term stock-based incentive compensation. In
2011, we considered the practices among our benchmark companies and industry in general, and evaluated the incentive value and risks associated with stock options (including our executives' experience
with "underwater" stock options). As a result, in 2012, we began limited use of stock options as part of the senior executives' compensation. The current target levels of performance-based RSUs were
reduced
proportionately. For 2012 equity awards, the annual equity incentive target value was allocated as 25% stock options and 75% in performance-based RSUs.
Broader Benchmark Groups
We recruit our senior executives from a wide range of industries. While some positions are media-specific, talented and experienced
executives for other positions may be found in other industry sectors. For 2012, we decided to use two groups to consider both the media industry and "general industry" compensation practices. We
selected these general industry companies using the same criteria as the media benchmark group, such as revenue that is between 0.5 times and 2 times our revenue. The selected general industry
companies focus on sales and services to consumers rather than to businesses. These general industry companies tend to pay less than the media benchmark group, but nevertheless, we decided that
reviewing the two benchmark groups' pay practices separately would help us make appropriate compensation decisions. For further information, see the discussion on page 43.
2. Our 2012 Business Results and Incentive Compensation Payouts
In
terms of pay for performance, the 2012 compensation annual bonus and long-term performance RSU stock payments were aligned with the Company's performance.
The
following section presumes prior understanding of our incentive program objectives and design. For additional information about the objectives of the compensation programs, including the incentive
programs, see Compensation Program Objectives and Components of Pay beginning on page 41. For additional information about the design of the bonus and performance RSU programs, see the 2012
Grants of Plan-Based Awards Table and the related discussion beginning on page 58.
We
use a variety of internal and external measures of our business to determine performance. We also compare our performance to our benchmark groups and consider analysts' consensus as we develop
performance targets and evaluate our performance.
We
use objective performance measures and formulaic calculations that are balanced with judgment and discretion to set compensation opportunities and to determine payouts. The performance measures in
the bonus and performance RSU plans generally apply to the NEOs as an executive team accountable for the achievement of all of the goals, regardless of organizational responsibilities. Although
individual performance is a factor in the Committee's decisions, the bonuses reflect overall Company performance more than individual performance.
35
Table of Contents
DIRECTV
When
setting target performance levels for annual bonuses and the long-term stock awards (performance RSUs), we avoid combinations of performance measures that might drive risky
short-term decisions. Long-term incentives are paid in stock to link the value of the potential award to increasing the stock value for stockholders. We further link
long-term growth in the stock price for stockholders to the executives' personal net worth with a stock ownership policy that requires executives to acquire and hold until retirement or
other termination of employment, a significant amount of Company stock.
Details of Pay-for-Performance Decisions at the End of 2012
One-Year Performance and 2012 Bonuses
The NEOs' bonus funding is based on attaining performance goals for cash flow before interest and taxes (CFBIT), which is a
comprehensive measure of our operating performance because it addresses revenue, operating expenses and capital expenditures. See Supplementary Chart 6 for the target and the performance and
payout ranges that limit the size of the bonuses. The Committee determined that for the 2012 annual bonus program based on CFBIT, the maximum funding level was achieved.
Supplementary Chart 62012 Bonus Plan
|
|
|
|
|
|
|
|
|
|
|
Performance Measure
|
|
Weight
|
|
Annual
Target
|
|
Performance
Range
|
|
Payout
% Range
|
|
Final
Performance
|
Annual Cash Flow Before Interest and Taxes (CFBIT)
|
|
100%
|
|
$2.0 Billion
|
|
$0 to $2.75 Billion
|
|
0% to 200%
|
|
$4.4 Billion
|
|
Once the maximum bonus fund was determined, the Committee used a "balanced scorecard" approach to determine the actual 2012 bonuses. This approach evaluates
three performance areas
for the DIRECTV US and Latin America business segments: (i) base business, (ii) strategic initiatives, and (iii) talent & teamwork goals.
Base business
included financial and operating performance, with objective formula-based measures of DIRECTV US and DIRECTV Latin America growth in such
measures as revenue, OPBDA, pre-SAC margin, CFBIT and net new subscribers.
To
determine base business results for consolidated DIRECTV (which reflects the responsibilities of the NEOs), the Committee used a formula of 75% DIRECTV US results and 25% DIRECTV Latin America
results (for Mr. Churchill, 20% consolidated results and 80% DIRECTV Latin America results, respectively, reflecting his primary responsibility for DIRECTV Latin America results).
Strategic Initiatives and Talent & Teamwork
goals were evaluated based on qualitative objectives and progress against quantitative measures.
Strategic Initiatives included new growth opportunities for subscribers and revenues, and customer experience. The Talent & Teamwork goals included succession planning, leadership and employee
development, teamwork, diversity and corporate citizenship.
Overall Evaluation
The Committee determined that the Company had met or exceeded the quantitative operational and financial goals for DIRECTV US and DIRECTV Latin
America in
Base Business,
but had not achieved the targeted growth in net new subscribers in DIRECTV US. We performed well in the talent and teamwork
goals, but these achievements were offset by performance that was lower against the quantitative and qualitative goals in our strategic initiatives. Other accomplishments include growing our market
share in Latin America, the launch of new products and services for our subscribers, initiatives to
36
Table of Contents
Executive Compensation: Compensation Discussion and Analysis
improve
customer service, satisfaction and retention, our employee volunteer results and corporate social responsibility achievements, and development of management and other related
human resources initiatives.
Beyond
the specific bonus measures, the Committee also assessed the performance achieved in the performance RSU grant programs as shown in Supplementary Charts 9, 11 and 12.
Further,
the Committee reviewed an analysis of three-year to five-year Company performance compared to the benchmark groups. Growth in revenue, growth in CFBIT, and
three-year and five-year TSR were used as performance measures that are understood and monitored by investors. The independent consultant did the analysis and advised the
Committee that for the period 2009 to 2011 (for most companies, 2012 financial data was not available at the time of the evaluation), the Company had performed in the top quartile of both the media
and the general industry benchmark groups.
Following
these evaluations, the Committee used its judgment and discretion to evaluate the balanced scorecard and other Company performance as a whole and to determine the final bonuses to be paid.
Overall,
DIRECTV performance in 2012 was not as strong as 2011 performance. DIRECTV US performed slightly better than 2011. DIRECTV Latin America performed well in all areas but at a lower level than
2011. Overall performance was above target at 111%, with DIRECTV US performance below that level and DIRECTV Latin America above that level.
For
each NEO (other than the CEO), performance for base business was weighted 70%, while achievements in strategic initiatives, talent and teamwork and individual performance were weighted 30%.
As
a result, Mr. White earned a bonus of 128%. Bonuses earned by the other NEOs ranged from 105% to 116% of the target bonus opportunity for the year.
Overall,
the bonus performance percentages reflected a reduction from 2011. The 2012 bonuses determined by the Committee for the NEOs were each less than the maximum bonus funding based on the CFBIT
performance of the Company in 2012.
Supplementary Chart 7Annual
Bonus Performance Over/Under 100% of
Target Performance
Supplementary
Chart 7 shows the Company's annual bonus percentage performance, as determined by the Committee using the analyses described above and in prior proxy statements, for the past
three years as a percentage above or below 100% of target performance. For example, an overall performance of 105% would show as +5% in the chart.
The
individual bonuses are shown in Supplementary Chart 10 on page 39 and also in the 2012 Summary Compensation Table on page 54 in column (f) Non-Equity
Incentive Plan Compensation. For a reconciliation of OPBDA, CFBIT and pre-SAC margin, which are
non-GAAP financial measures, refer to Annex A attached to this Proxy Statement and incorporated herein by reference.
37
Table of Contents
DIRECTV
Three-Year Performance: 2010-2012 Long-Term Performance and Stock Payouts
Because we face a constantly shifting mix of competition, economic conditions and new technology, the performance RSU program is
designed to measure year-over-year growth that is sustained over the three-year performance period, rather than a single set of targets at the end of three years.
Each year, we combine the three performance measures into a single weighted annual performance factor; at the end of the three years, we add the three annual performance factors and divide the result
by three. We believe that this provides a clearer picture of our long-term performance.
2010-2012 Performance RSU Grants
The performance period for the 2010-2012 performance RSU grants was January 1, 2010 to December 31, 2012.
Supplementary Chart 9 shows the
performance measures, annual growth targets, payout ranges and results. We selected revenue and EPS as objective measures of both "top line" and "bottom line" growth, both of which are necessary for
solid financial performance, and CFBIT as a key measure of managing operations, because it incorporates revenue, operating expenses and capital expenditures. The maximum payout in shares was 125% of
the grant and the payout could be reduced to zero for poor performance.
For
the three-year performance period ending in December 2012 based on growth in revenue, CFBIT and EPS, our performance is summarized in the following table (target level performance is
100%).
|
|
|
|
|
Year
|
|
Performance
|
|
2010
|
|
|
150
|
%
|
2011
|
|
|
100
|
%
|
2012
|
|
|
128
|
%
|
2010-2012 Average
|
|
|
126
|
%
|
3-Year Stock Price Increase
|
|
|
50
|
%
|
|
|
|
|
|
The
Committee reviewed Company performance as of the end of 2012 and determined the 2012 performance factor of 128% as shown in Supplementary Chart 9. When added to the 2010 and 2011 annual
performance factors of 150% and 100%, respectively, the average performance was determined to be 126%. This 126% 3-year performance level exceeded the maximum 125% level set by the
Committee in 2010, thus the Committee reduced the payout level to the maximum 125% of shares granted.
The
stock payments to NEOs for the 2010-2012 RSUs are shown in Supplementary Chart 10 and in the 2012 Option Exercises and Stock Vested Table on page 65.
Supplementary
Chart 8 shows that our performance RSUs are aligned with our performance and investment returns to our stockholders. The chart compares the Total Shareholder Return (TSR) over
three years to the Company's RSU performance over the same three years as a percentage above or below 100% of the target number of shares. For example, an overall RSU performance of 105% would show as
+5% in the chart (that is, 105% of the target number of RSUs were earned).
Supplementary Chart 8
Three-Year TSR Compared to RSU
Performance Over/Under 100% of Target
38
Table of Contents
Executive Compensation: Compensation Discussion and Analysis
Supplementary Chart 92010-2012 Performance RSU GrantsPerformance Factors and Results
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
|
|
Performance Measure
|
|
Weight
|
|
Annual
Growth
Target
|
|
Growth
Range
|
|
Payout
% Range
|
|
|
|
Actual
|
|
Weighted
|
|
|
|
Actual
|
|
Weighted
|
|
|
|
Actual
|
|
Weighted
|
|
|
|
Final
Payout:
3-Year-
Average
|
|
Annual Revenue Growth (%)
|
|
|
1/3
|
|
|
7%
|
|
0% to 9%
|
|
0% to 150%
|
|
|
|
|
11.8%
|
|
|
50%
|
|
|
|
|
13.0%
|
|
|
50%
|
|
|
|
|
9.2%
|
|
|
50%
|
|
|
|
|
|
|
Annual CFBIT Growth (%)
|
|
|
1/3
|
|
|
15%
|
|
0% to 20%
|
|
0% to 150%
|
|
|
|
|
21.8%
|
|
|
50%
|
|
|
|
|
-5.3%
|
|
|
0%
|
|
|
|
|
19.0%
|
|
|
46.5%
|
|
|
|
|
|
|
Annual EPS Growth (%)
|
|
|
1/3
|
|
|
35%
|
|
0% to 50%
|
|
0% to 150%
|
|
|
|
|
60.4%
|
|
|
50%
|
|
|
|
|
50.2%
|
|
|
50%
|
|
|
|
|
33.1%
|
|
|
31.6%
|
|
|
|
|
|
|
Annual Performance Factor (%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150%
|
|
|
|
|
|
|
|
100%
|
|
|
|
|
|
|
|
128.1%
|
|
|
|
|
125%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The final 2012 bonuses and 2010-2012 performance-based shares earned by the NEOs are shown in the following chart.
Supplementary Chart 10Final 2012 Bonus and 2010-2012 Performance RSU Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 Bonus
One-Year Performance:
Performance Varies by
Individual Executive
|
|
|
|
2010-2012 RSUs
Three-Year Performance
Team-Based Performance: 125%
3-Year Stock Price Gain: 50%
|
|
Name of
Officer
(a)
|
|
Target
Bonus
($000)
(b)
|
|
Final Bonus
($000)
(c)
|
|
Final
Bonus
as % of
Target
(d)
|
|
|
|
Target
Shares
(#)
(e)
|
|
Final
Shares
(#)
(f)
|
|
Value at
Grant
Date
($000)
(g)
|
|
Final
Value
(1)
($000)
(h)
|
|
Final
Value
as % of
Grant
Date
Value
(%)
(i)
|
|
Michael White
|
|
|
3,124
|
|
|
4,000
|
|
|
128%
|
|
|
|
|
435,400
|
|
544,250
|
|
|
13,467
|
|
|
26,772
|
|
|
199%
|
|
Patrick Doyle
|
|
|
825
|
|
|
926
|
|
|
112%
|
|
|
|
|
41,380
|
|
51,725
|
|
|
1,280
|
|
|
2,544
|
|
|
199%
|
|
Bruce Churchill
|
|
|
2,100
|
|
|
2,428
|
|
|
116%
|
|
|
|
|
59,759
|
|
74,699
|
|
|
1,848
|
|
|
3,674
|
|
|
199%
|
|
Larry Hunter
|
|
|
1,100
|
|
|
1,185
|
|
|
108%
|
|
|
|
|
58,345
|
|
72,932
|
|
|
1,805
|
|
|
3,588
|
|
|
199%
|
|
Mike Palkovic
|
|
|
720
|
|
|
794
|
|
|
110%
|
|
|
|
|
45,897
|
|
57,372
|
|
|
1,420
|
|
|
2,822
|
|
|
199%
|
|
Romulo Pontual
|
|
|
744
|
|
|
780
|
|
|
105%
|
|
|
|
|
37,345
|
|
46,682
|
|
|
1,155
|
|
|
2,296
|
|
|
199%
|
|
All NEOs as a group
|
|
|
8,613
|
|
|
10,113
|
|
|
117%
|
|
|
|
|
678,126
|
|
847,660
|
|
|
20,975
|
|
|
41,696
|
|
|
199%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Includes
the value of the increase in the stock price over the three years; the final value was $49.19 per share upon distribution in February 2013 as
compared to the $30.93 grant date value in February 2010.
Performance Update on Other Outstanding Performance RSU Grants
As discussed following the 2012 Grants of Plan-Based Awards Table beginning on page 58, annual grants of performance RSUs result
in three overlapping performance plans during any year after the first two years. In addition to the 2010-2012 performance RSUs discussed above, we believe that it is useful for
stockholders to understand the performance measures and features of the two other outstanding plans, including the performance to date. The following describes the 2011-2013 and the
2012-2014 performance RSU programs.
2011-2013 Performance RSU Grants
The performance period for the 2011-2013 performance RSU grants is January 1, 2011 to December 31, 2013. Supplementary
Chart 11 shows the performance measures, annual growth targets, payout ranges and results.
The
weighting of the performance measures remained the same as the 2010-2012 performance RSU grant. The maximum payout in shares of Common Stock was increased to 150% of the performance
RSU grant and the payout could be reduced to zero for poor performance. The Committee reviewed Company performance as of the end of 2012 and determined the 2012 performance factor of 146.3% as shown
in Supplementary Chart 11.
39
Table of Contents
DIRECTV
Supplementary Chart 112011-2013 Performance RSU GrantsPerformance Factors and Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
2012
|
|
Performance Measure
|
|
Weight
|
|
Annual
Growth
Target
|
|
Growth
Range
|
|
Payout
% Range
|
|
|
|
Actual
|
|
Weighted
|
|
|
|
Actual
|
|
Weighted
|
|
Annual Revenue Growth (%)
|
|
|
1/3
|
|
|
8%
|
|
2% to 10%
|
|
0% to 150%
|
|
|
|
|
13.0%
|
|
|
50%
|
|
|
|
|
9.2%
|
|
|
43.6%
|
|
Annual CFBIT Growth (%)
|
|
|
1/3
|
|
|
11%
|
|
0% to 20%
|
|
0% to 200%
|
|
|
|
|
-5.3%
|
|
|
0%
|
|
|
|
|
19.0%
|
|
|
62.8%
|
|
Annual EPS Growth (%)
|
|
|
1/3
|
|
|
29%
|
|
0% to 50%
|
|
0% to 200%
|
|
|
|
|
38.8%
|
|
|
48.9%
|
|
|
|
|
33.1%
|
|
|
39.9%
|
|
Annual Performance Factor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98.9%
|
|
|
|
|
|
|
|
146.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance for 2013 will be combined with 2011 and 2012 results to determine the final performance under this plan.
2012-2014 Performance RSU Grants
The performance period for the 2012-2014 performance RSU grants is January 1, 2012 to December 31, 2014. Supplementary
Chart 12 shows the performance measures, annual growth targets, payout ranges and results.
The
Committee replaced EPS with Net Income as a measure of "bottom line" performance. The weighting of the performance measures
remained
the same as the 2011-2013 performance RSU grant. The maximum payout in shares of Common Stock remained at 150% of the performance RSU grant and the payout could be
reduced to zero for poor performance. The Committee reviewed Company performance as of the end of 2012 and determined the 2012 performance factor of 160.2% as shown in Supplementary Chart 12.
Supplementary Chart 122012-2014 Performance RSU GrantsPerformance Factors and Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
Performance Measure
|
|
Weight
|
|
Annual
Growth
Target
|
|
Growth
Range
|
|
Payout
% Range
|
|
|
|
Actual
|
|
Weighted
|
|
Annual Revenue Growth (%)
|
|
|
1/3
|
|
|
8%
|
|
4% to 10%
|
|
0% to 150%
|
|
|
|
|
9.2%
|
|
|
43.6%
|
|
Annual CFBIT Growth (%)
|
|
|
1/3
|
|
|
13%
|
|
0% to 25%
|
|
0% to 200%
|
|
|
|
|
19.0%
|
|
|
49.9%
|
|
Annual Net Income Growth (%)
|
|
|
1/3
|
|
|
7%
|
|
0% to 12%
|
|
0% to 200%
|
|
|
|
|
13.0%
|
|
|
66.7%
|
|
Annual Performance Factor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance for 2013 and 2014 will be combined with 2012 results to determine the final performance under this plan.
40
Table of Contents
Executive Compensation: Compensation Discussion and Analysis
3. Our Compensation Program Objectives and Components of Pay
Objectives
We have developed compensation programs to support the following objectives:
-
-
Pay for performance
-
-
Balance short- and long-term goals and risk-to-reward relationships that encourage
increasing long-term stockholder value, and
-
-
Recruit and retain talented executives.
Supplementary
Chart 13 shows how our primary compensation and benefit programs support our compensation program objectives. A significant portion of a NEO's compensation depends on actual performance
measured against annual and long-term performance goals. Long-term incentives are paid in stock to link the value of the potential award to increasing the stock value for
stockholders.
Supplementary Chart 13Compensation Objectives and Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
Fixed Pay Elements For Retention
and Stability
|
Objective
|
|
Annual
Bonus
|
|
Long-Term
Stock
Awards
|
|
|
|
Base
Salary
|
|
Employee
Benefits
|
|
Post-Termination
Compensation
|
Pay for Performance
|
|
ü
|
|
ü
|
|
|
|
|
|
|
|
|
Balance short- and long-term goals and risk-to-reward relationships that encourage increasing long-term stockholder value
|
|
ü
|
|
ü
|
|
|
|
ü
|
|
ü
|
|
ü
|
Recruit and retain executives
|
|
ü
|
|
ü
|
|
|
|
ü
|
|
ü
|
|
ü
|
Our Compensation ProgramsWhat We Pay and Why
The principal compensation components for the NEOs are:
-
-
A base salary
-
-
An annual performance-based bonus paid in cash, and
-
-
A
long-term performance-based incentive stock grant.
The
NEOs are also eligible for benefits and perquisites that are part of a competitive compensation package that provides health, welfare, savings and retirement programs comparable to those provided
to employees and executives at other companies in our industry.
Some
compensation programs are related, meaning that the value of one program affects the value of another program. Increasing base salary increases target cash bonus and stock award opportunities, as
well as savings, pension and disability benefits. Increasing or decreasing a bonus also affects pension and savings plan benefits, but long-term incentive awards are excluded from
calculation of pension and savings plan benefits.
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DIRECTV
Supplementary Chart 14Compensation Programs
|
|
|
Compensation Program: Purpose/Key
Characteristics
|
|
Targeted Pay Opportunity Level
|
Base Salary:
Compensate for day-to-day performance at the executive's level of responsibility based on skills, experience and accomplishments. Base salaries are considered fixed compensation and are
paid in cash.
|
|
Between the medians of the two benchmark groups. (1)
|
Annual Bonus:
Motivate and reward current results by aligning efforts across the Company to achieve specific measurable results. Bonuses are considered variable compensation, are based on annual
performance and are paid in cash.
|
|
Combined base salary and target bonus between the medians of the two benchmark groups. Depending on actual performance, payouts could be above or below the target level. (1)
|
Long-term Incentives:
Motivate and reward long-term results, typically over three years for the performance RSUs and up to 10 years for stock options, by aligning efforts across the Company to
achieve specific measurable results and increase the value of the Company's Common Stock. Performance RSUs and stock options are considered variable compensation, based on long-term Company performance and are paid in stock.
|
|
Combined base salary, target bonus and target long-term incentive between the medians of the two benchmark groups. Depending on actual performance, payouts could be above or below the target level. (1)
|
Employee Benefits (2):
Health, welfare, disability and life insurance plans protect against catastrophic expenses and loss of income. The savings and pension plans provide retirement
income.
|
|
Except for the few perquisites discussed following the 2012 Summary Compensation Table on page 54, the NEOs and other senior executives participate in the same benefit plans and on the same terms as all other
employees; aggregate targeted value is around the median of general industry.
|
|
-
(1)
-
The
Committee may vary from these guidelines based on its assessment of an executive's experience and level of contribution to the Company's current and
future success, as well as the executive's compensation history.
-
(2)
-
The
benefit plan descriptions in this Proxy Statement and accompanying the following charts provide an explanation of the major features of our employee
benefit plans. These plans are administered and governed at all times by the official plan documents and the descriptions in this Proxy Statement of these plans are qualified in their entirety by
reference to the applicable document. The Company reserves the right to amend, suspend or terminate the plans completely or in part at any time and for any reason. Stockholders may request a copy of a
plan document by contacting the Corporate Secretary as provided on page 11.
Target Pay Mix
Pay mix is the percentage of each of base salary, target bonus opportunity and long-term stock-based awards to the total of these three
pay components. In 2011, we introduced pay mix as a new factor in evaluating pay
opportunity,
and have set a target profile for the senior executives, including the NEOs (other than the CEO), to provide approximately 50% of annual pay opportunity in stock-based
incentives, 25% in annual performance-based bonus and 25% in base salary.
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Executive Compensation: Compensation Discussion and Analysis
Benchmarking Groups
The Committee annually evaluates pay levels among benchmark companies to help set the level of the NEOs' compensation.
While
some positions are media-specific, talented and experienced executives for other positions may be found in other industry sectors. Consequently, for 2012, to evaluate compensation levels and
practices, we decided to use two benchmark groups, the previous media benchmark group and a "general industry" group.
The
selected companies range both above and below the Company in comparison factors such as revenue, market capitalization and net income. Certain companies that are significantly larger or smaller
than the Company were excluded from the lists.
We
selected these general industry companies using the same criteria as the media benchmark group, such as revenue that is between 0.5 times and 2 times our revenue. The selected general industry
companies focus on sales and services to consumers rather than to businesses.
In
our reviews of the two benchmark groups, we determined that our revenue, EBITDA, net income and market capitalization placed us near the top quartile of the media benchmark group, while in the
general industry benchmark group, our revenue was in the top quartile and market capitalization was nearer the median.
We
used this general industry data to better understand pay levels, trends and practices for executives in similar jobs even though the companies are in different sectors and have different business
models, products and services. The general industry companies tend to pay less than the media benchmark group, but we decided that reviewing the two benchmark groups' pay practices separately would
help us make appropriate pay decisions. As noted in Supplementary Chart 14 on page 42, for the NEOs, we target pay
levels
between the medians of the pay data of the two benchmark groups.
Media Benchmark Group
The media benchmark group focuses on companies in the media, telecommunications and multichannel video distribution industries. These
companies reflect:
-
-
A broad set of companies in our industry
-
-
Companies that our existing media benchmark group had identified in their benchmark group
("peers of peers"), and
-
-
Other companies that listed us as a peer without regard to size or industry.
For
2012, we removed British Sky Broadcasting Group because of the limited access to executive pay data; added CenturyLink, Inc., which had acquired Qwest Communications International in the
prior year's group, and restored Charter Communications, Inc. to the group because it had emerged from bankruptcy.
|
|
Cablevision Systems Corporation
|
CBS Corporation
|
CenturyLink, Inc.
|
Charter Communications, Inc.
|
Comcast Corporation
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Discovery Communications
|
DISH Network Corp.
|
Gannett Co., Inc.
|
Liberty Global, Inc.
|
News Corporation
|
Sprint Nextel Corp.
|
Time Warner Cable, Inc.
|
Time Warner, Inc.
|
Viacom, Inc.
|
Walt Disney Co.
|
|
General Industry Benchmark Group
Constellation Energy Group, Inc. was included in the general industry benchmark group for our 2012 compensation planning, but
the company was subsequently acquired and executive compensation pay data no is longer available.
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DIRECTV
The
following table lists the 2012 general industry benchmark group.
|
|
3M Company
|
Abbott Laboratories
|
Altria Group, Inc.
|
American Express Co.
|
Bristol Myers Squibb Co.
|
CIGNA Corp.
|
Colgate Palmolive Co.
|
Constellation Energy Group, Inc.
|
Cummins Inc.
|
Deere & Co.
|
Eaton Corp
|
Emerson Electric Co.
|
General Mills Inc.
|
Kimberly Clark Corp.
|
McDonalds Corp.
|
Medtronic Inc.
|
Pepsico Inc.
|
Southern Co.
|
Textron Inc.
|
US Bancorp
|
Xerox Corp.
|
|
Severance Agreements and Post-Termination Compensation
We adopted a CEO Severance Plan in 2012 and an Executive Severance Plan in 2012. Based on the independent consultant's previous research on the
benchmark groups, and the Committee's own experience, pre-established arrangements to settle compensation and benefits help to retain key executives by providing assurances of appropriate
treatment to the executives upon termination of employment. This allows the executive to focus his or her attention on the interests of the Company. These arrangements support the development of an
experienced management team, provide for rapid
pre-determined transition out of the Company and are competitive with practices among the benchmark groups.
The
severance plans include restrictions not to compete with the Company and not to solicit employees to leave the Company. We consider
the
value of these restrictions when determining the levels of post-employment compensation. There are no tax gross-ups.
Mr. White
participates in the CEO Severance Plan. Mr. Palkovic had an individual employment agreement with severance compensation arrangements; Mr. Palkovic voluntarily agreed to
an early cessation of the agreement in February 2013, which is discussed in Agreements with Executive Officers on page 61. Mr. Palkovic and the remaining NEOs participate in the Executive
Severance Plan. For more information on post-termination compensation, see "Potential Payments Upon Termination or Change In Control" beginning on page 72.
Change in Control"Double Triggers"
The terms and conditions of the stock awards generally require a "double trigger" for accelerated vesting. A "double trigger" is a change of control
of the Company followed by a termination of the executive's employment other than for resignation or for cause. We have no other agreements, arrangements or other programs for the NEOs or other
employees in which entering into or completing a change-in-control of the Company (i) provide additional compensation to be paid, (ii) provide tax
gross-ups, or (iii) provide for accelerated vesting or payment of compensation, except for the 2010 Stock Plan approved by stockholders on June 3, 2010.
In
the 2010 Stock Plan, even upon the dissolution of the company or other event where the company does not continue as a public company, accelerated vesting does not apply where the Committee has
provided for the substitution, assumption, exchange or other continuation of the award.
For
more information, see "Change In Control" beginning on page 73.
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Executive Compensation: Compensation Discussion and Analysis
2012 Compensation Planning Analysis and Decisions
The Committee evaluates changes in total direct compensation each year (base salary, annual bonus opportunity and long-term incentive
opportunity). The Committee reviewed a number of information sources before determining the annual compensation opportunities, see "Processes and Analytical Tools" on page 48. For
Messrs. Doyle, Churchill, Hunter and Pontual, we also considered the potential impact of the 2011 year-end lapse of the employment agreements. Although prior incentive pay
earned is addressed in the tally sheets, an executive's annual compensation opportunities are linked to current and future performance and not based on or limited by accumulated compensation and
incentive awards for past achievements. For additional information on tally sheets, see "Tally Sheets" beginning on page 49.
Compared
to the benchmark groups, the 2011 pay levels for Messrs. Doyle, Churchill, Hunter and Pontual were below our target levels while Mr. Palkovic was approximately at our target
level. This information was used as part of our process to determine 2012 pay opportunities.
Mr. White's
2012 base salary was increased slightly over 2% per the CPI formula in his employment agreement, his target bonus remained unchanged at 200% of base salary and he received no equity
grant, all of which resulted in an increase of about 2% in total target pay opportunity. For the
remaining NEOs, the combined 2012 base salaries, target bonuses and target equity award opportunity averaged 13% over 2011 target levels. The 2012 annual equity awards were allocated 75% in target
value in 3-year performance-based RSUs and 25% in stock options.
In
addition to the 2012 annual equity award, Mr. Churchill was awarded a separate 3-year performance-based RSU award with a $3 million target value. This was awarded in
recognition
of the past sustained growth achieved at DTVLA and as an incentive for Mr. Churchill to continue that significant growth at DTVLA, and is not expected to be awarded
in future years. For more information about this award, see the discussion following the 2012 Grants of Plan-Based Awards Table on page 58.
The
CEO's target pay opportunity as compared to the next highest paid NEO and as compared to the average pay of the other four NEOs as a group is called our internal pay multiple. For 2012, the CEO's
pay multiple is 1.9 times the second highest paid NEO, Mr. Churchill, and 3.2 times that of the average of the other NEOs (including Mr. Churchill).
Supplementary
Chart 15 sets out the resulting 2012 compensation opportunity for the NEOs. It differs somewhat from the 2012 Summary Compensation Table on page 54. Supplementary Chart 15
shows base salary at the approved rate for a full year, while the 2012 Summary Compensation Table shows actual salary paid during 2012. Supplementary Chart 15 shows the annual target bonus, which
assumes that all 2012 goals are met at 100%, while the Summary Compensation Table shows the bonuses paid based on actual 2012 performance. Supplementary Chart 15 excludes the values for
pensions, savings and other programs such as perquisites because the Committee considers them under the context of broader benefit programs and not as principal compensation programs, while the 2012
Summary Compensation Table includes them. "Target" in this chart assumes that for the bonus and performance RSUs, 100% of performance goals are met and, for the performance RSUs, the stock price
(which also affects the value of the RSUs) remains at the grant price and does not vary over the performance period.
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Supplementary Chart 152012 Executive Officer Compensation Opportunity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 Cash Bonus
Opportunity
|
|
|
|
2012-2014 Stock-Based
Grants Opportunity
|
|
|
|
|
Name
(a)
|
|
2012 Base
Salary
($000)
(b)
|
|
|
|
Target
Bonus
as % of
Base
Salary
(%)
(c)
|
|
Target
Bonus
Opportunity
($000)
(d)
|
|
|
|
Target
Stock
Opportunity
as % of
Base Salary
(%)
(e)
|
|
Target
Stock
Opportunity
($000)
(f) (1)
|
|
|
|
Total Annual
Target
Compensation
($000)
(g)
|
Michael White
|
|
1,562
|
|
|
|
200%
|
|
3,124
|
|
|
|
580%(2)
|
|
9,063(2)
|
|
|
|
13,749
|
As percent of total
|
|
11%
|
|
|
|
|
|
23%
|
|
|
|
|
|
66%
|
|
|
|
|
Patrick Doyle
|
|
825
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|
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|
100%
|
|
825
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|
|
|
206%
|
|
1,698
|
|
|
|
3,348
|
As percent of total
|
|
25%
|
|
|
|
|
|
25%
|
|
|
|
|
|
50%
|
|
|
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|
Bruce Churchill
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|
1,400
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|
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|
150%
|
|
2,100
|
|
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|
269%
|
|
3,766(3)
|
|
|
|
7,266
|
As percent of total
|
|
19%
|
|
|
|
|
|
29%
|
|
|
|
|
|
52%
|
|
|
|
|
Larry Hunter
|
|
1,100
|
|
|
|
100%
|
|
1,100
|
|
|
|
206%
|
|
2,264
|
|
|
|
4,464
|
As percent of total
|
|
25%
|
|
|
|
|
|
25%
|
|
|
|
|
|
50%
|
|
|
|
|
Michael Palkovic
|
|
900
|
|
|
|
80%
|
|
720
|
|
|
|
195%
|
|
1,755
|
|
|
|
3,375
|
As percent of total
|
|
27%
|
|
|
|
|
|
21%
|
|
|
|
|
|
52%
|
|
|
|
|
Romulo Pontual
|
|
930
|
|
|
|
80%
|
|
744
|
|
|
|
173%
|
|
1,612
|
|
|
|
3,286
|
As percent of total
|
|
28%
|
|
|
|
|
|
23%
|
|
|
|
|
|
49%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
amounts shown in column (f) are based on the grant date fair value of the 2012-2014 long-term incentives, which were
allocated as performance RSUs and stock options. For additional detail, see the 2012 Grants of Plan-Based Awards table on page 58. For Mr. White, see footnote (2)
below, and for Mr. Churchill, see footnote (3) below.
-
(2)
-
In
January 2010, Mr. White was granted 1,011,100 stock options with an exercise price of $33.74 and 435,400 performance-based shares (performance
RSUs) for the three-year term of his employment agreement. These grants were valued on the January 4, 2010 grant date at $12,497,196 and $14,690,396, respectively. The amounts shown
in this chart are the equivalent annual amount as if one-third of the grant had been made each year during the term of his agreement. This is a typical method used to allocate the values
of stock grants that are not made on an annual cycle to compare them to the value of grants to other executives made annually. Mr. White's 2012 stock option award on November 7, 2012,
was awarded as part of the new employment arrangements effective in 2013, and was not part of the annual compensation review in early 2012; therefore, it is excluded from this table.
-
(3)
-
To
permit a better comparison of Mr. Churchill's annualized grant value to those of the other NEOs, Mr. Churchill's stock opportunity includes
the value of (i) the 2012-2014 annual performance-based RSU award, (ii) the 2012 stock option award, both of which are expected to be annual grants in the future, plus
(iii) the annualized value (one-third of the 3-year opportunity value) of the additional performance-based RSU award discussed following the 2012 Grants of
Plan-Based Awards on page 58, which is not expected to be an annual grant in the future.
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Executive Compensation: Compensation Discussion and Analysis
4. Our Policies, Guidelines and Practices Related to Executive Compensation
Roles in Compensation Decisions
Compensation Committee
The Committee and the Board evaluate the CEO's performance and determine all adjustments to the CEO's pay, the CEO's annual bonus and all payouts of
stock awards to the CEO. The Committee:
-
-
Reviews the assessments of Company performance provided by the CEO and other information provided by management, and
-
-
Accepts or
adjusts the CEO's pay assessments for the other NEOs in light of analyses and advice provided by the consultant
and the Committee's own evaluation of Company and NEO performance.
Although
the Committee receives information and recommendations regarding the design and level of compensation of our NEOs from the Consultant and management, the Committee makes the final decisions
as to the plan design and compensation levels for the NEOs.
In
addition, the Committee, with assistance from the Consultant and management:
-
-
Reviews NEOs' compensation to ensure that a significant portion is performance-based to create incentives for above-target
performance and consequences for below-target performance
-
-
Determines annual bonus and long-term stock payouts based on actual performance against targets that are
linked to Company performance, and approves base salary adjustments
-
-
Reviews tally sheets of total compensation and benefits for each executive officer to ensure the Committee understands
all
aspects of each executive officer's total compensation, and
-
-
Confirms that the total compensation paid to the CEO and the other NEOs is appropriate based on the Company's performance
compared to the benchmark groups and otherwise as measured by financial measures, including stockholder returns.
Independent Compensation Consultant
To obtain access to independent and objective compensation data, analysis and advice, the Committee retained the services of an independent
compensation consultant that is hired by and reports to the Committee. During 2010, the Committee engaged Pay Governance LLC, as its independent consultant (Consultant), and continued to use
Pay Governance in that role through 2012.
To
ensure independence of the Consultant, the Committee annually reviews all other services performed by the Consultant for the Company and we minimize such other work. The Consultant may have other
relationships with the Company, so long as those relationships do not interfere with its ability to provide independent advice to the Committee. In 2012, the SEC and the stock exchanges issued rules
concerning the independence of advisors to Compensation Committees and the evaluation of potential conflicts of interest as an advisor. The Committee considered these rules in its annual review of the
Consultant's independence. During 2012, Pay Governance LLC performed no work for management and the Committee has confirmed the Consultant's continued independence.
Committee
members can engage or initiate contact with the Consultant and have direct access to the Consultant without management involvement. The Consultant attends meetings as appropriate at the
invitation of the Committee. Representatives of the Consultant attended all Committee meetings in 2012 and, generally, attend executive sessions of the Committee.
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DIRECTV
The
Consultant reviews briefing materials prepared by management for the Committee (including those on individual NEO compensation matters), calibrates plan designs, incentive opportunities and
payouts with external performance information, and analyzes and provides objective advice and recommendations to the Committee on management's recommendations and proposals. The Consultant also
gathers, evaluates and reports on competitive market data and other background information, including insight on incentive plan design trends in general industry or among the benchmark groups.
Examples of reports and projects that the Committee assigns to the Consultant may be found in the section "Independent Reports" on page 49.
The
Consultant meets with Company management, including the CEO, from time to time, particularly when changes are contemplated to the bonus or stock incentive plans. The Consultant obtains information
from Company management with regard to such matters as the Company's performance, business strategy and overall compensation plan design.
The
Consultant also assists the Committee in designing compensation governance policies and with its periodic charter reviews.
Independent Legal Counsel
In 2012, the Committee continued to use Simpson Thacher & Bartlett, LLP (Simpson Thacher) as independent legal counsel. Simpson Thacher
performs no work for management and the Committee confirmed its independence for 2012. Simpson Thacher reviewed and advised the Committee on the form and the terms and conditions of the new CEO
Severance Plan and the 2012 CEO Non-Qualified Stock Option Award Agreement and represented the Committee in discussions with Mr. White's attorney.
CEO
The CEO provides the Committee with information to assist in the determination of
annual
base salaries, bonus payouts, stock plan payouts and whether to exercise its discretion to reduce bonuses or stock payouts from the maximum funding determined under those plans.
The CEO provides:
-
-
An assessment of the performance of the business over the past calendar year and longer, including discussion of various
business measures and the performance of each business unit and the primary operating areas
-
-
An assessment of individual performance of each NEO
-
-
Recommendations as to the level of compensation to be paid to each other executive officer, and
-
-
A self-assessment of his individual performance against objectives established at the beginning of each year.
Management
Senior management plays an important role because of its direct involvement in and knowledge of the business goals, strategies, experiences and
performance of the Company.
Messrs. White,
Hunter, Bosch, and our Vice President, Compensation and Benefits, generally attend Committee meetings and provide information to the Committee. In addition, Mr. Doyle and
the Senior Vice President of Investor Relations and Financial Planning recommend specific plan designs, performance measures and target levels of performance that are based on the
short-term and long-term business plans and analyst reports.
Processes and Analytical Tools
The Committee uses an annual agenda to ensure that its key compensation-related topics are addressed and reviewed over the course of
the year. The Committee considers a number of sources of information and uses various analytical tools to evaluate that information. The Committee works with the Consultant to review and discuss
compensation-related trends and issues that may not yet be reflected in recent compensation data.
48
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Executive Compensation: Compensation Discussion and Analysis
When
setting pay levels, no particular weight is given to any factor, although compensation data from the benchmark groups is considered more relevant to our pay levels than other sources of
information. The Committee relies on its judgment and experience to set compensation for each executive that is competitive with the benchmark groups, fair internally, and appropriate based on the
Company's performance and on the executive's level of responsibility, experience and contribution.
Financial Performance Reviews
To evaluate past performance and to set future performance goals, the Committee reviews reports on past and forecasted financial and operational
performance measures for the Company, DIRECTV US and DIRECTV Latin America, as well as analysts' consensus
forecasts. The Committee also reviews the Company's performance relative to that of the benchmark groups in key financial measures.
Pay for Performance Reviews
The Committee regularly reviews analyses by the Consultant on the alignment between performance and pay. "Earned and realizable" pay, consists of
amounts actually earned during a historical three-year period plus the estimated "paper" (unrealized) earnings in stock options and performance RSUs granted in the same period, and is
compared to Company performance, benchmark groups' performance and the benchmark groups' NEO earned and estimated pay.
For
purposes of this CD&A, the three-year period used to assess pay and performance alignment was 2009 through 2011 because, for most companies, 2012 financial data was not available at
the time of the evaluation. The CEO was not included in the analysis because Mr. White joined the Company in 2010 and we did not yet have three years of pay and performance history for
Mr. White as CEO.
For
pay in that three-year period, we included base salaries paid, actual bonuses earned, and equity and long-term incentives valued at the
end
of the three-year period (including in-the-money stock options granted during the three-year period and the value of performance
shares paid out during the three-year period, but excluding underwater stock options).
For
performance during 2009-2011, we measured the compound annual growth rates of CFBIT, revenue, and three-year and five-year TSR, each as compared to our
benchmark companies. When we compare actual pay and actual performance, we use the relative percentile ranking of each to evaluate the alignment between pay and performance.
Independent Reports
The Committee also reviews materials prepared or reviewed in advance of Committee meetings by the Consultant. These materials typically
include:
-
-
Annual report of executive pay opportunity against benchmark group data
-
-
Review of the performance measures and the difficulty of
achieving them
-
-
Progress on achieving desired executive stock ownership levels
-
-
Changes in the benchmark group companies
-
-
Stock utilization
-
-
The assessments of the Company's pay processes by third-party "governance/proxy advisors"
-
-
Analysis and advice on compensation programs or changes to existing programs, and
-
-
Trends and best practices in compensation design and disclosure.
Tally Sheets
Tally sheets enable the Committee to evaluate the full range of executive compensation, understand the magnitude of potential payouts as a result of
termination of employment, and consider changes to our compensation programs in light of "best practices" and emerging trends. Our tally sheets (i) summarize the value of each pay program,
including benefits and perquisites, and the total of an executive's compensation over the
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Table of Contents
DIRECTV
current
and previous years, (ii) summarize the amounts payable upon termination of employment under different scenarios and through programs such as pensions and savings that
have accumulated over a number of years of service, and (iii) summarize cumulative payments over the past five years for base salary, bonuses and stock payments.
Other Compensation Policies and Practices
Stock Ownership
Stock ownership is an additional way to align the financial interests of the executive officers with those of our stockholders.
Our
stock ownership policy covers all elected officers of the Company and executive vice presidents who report to the CEO.
These
executives are required to acquire and hold until retirement, resignation or other termination of employment, shares of Common Stock equal in value to a multiple of the executive's base salary.
The multiple for the CEO is six times base salary and the multiple for the other executives is three times base salary. We count directly and beneficially owned shares, vested performance RSUs, vested
in-the-money stock options and shares or equivalents held in the savings plans. Each executive has five years to attain the required ownership level.
We
believe that these target levels of ownership and the five-year accumulation period provide an appropriate balance between the interests of shareholders (i) to link an
executive's compensation and accumulated wealth to increasing the stock price, (ii) to avoid the risk of excessive concentration of stock ownership that could possibly lead to
risk-averse business decisions by management, with (iii) an executive's interest for appropriate opportunity to diversify personal assets.
As
of our annual review in 2012, each of the NEOs has met the required standard.
Stock Usage
We monitor the number of shares issued under the stock plan and the annual number of shares awarded under incentive programs (also known as the run
rate).
Insider Trading and Hedging
Insider trading is illegal. Hedging the economic risk of owning Company stock or stock-based incentive compensation by management is contrary to the
best interests of our stockholders. We maintain a policy that is applicable to all employees and the Board of Directors and prohibits insider trading and ownership of financial instruments or
participating in investment strategies that hedge the economic risk of owning Company stock, including share pledging through margin accounts or as collateral.
NEOs
generally are permitted to trade shares of the Company's Common Stock only during limited periods after public dissemination of the Company's annual and quarterly financial results. The Company
permits our executives to enter into plans that are intended to comply with the requirements of Rule 10b5-1 of the Exchange Act in order to permit our executive officers to
prudently diversify their asset portfolio and to assure that stock options may be exercised before their scheduled expiration date consistent with our policies. The General Counsel of the Company or
his designee must approve such plans.
Recovery of Compensation
This is also known as a "recoupment" or "clawback" policy. We believe in pay for performance. We also believe that pay that was earned because of
improperly stated performance should be returned to the Company and its stockholders.
It
is our policy to take reasonable efforts to recover cash and stock incentive awards in excess of the properly recalculated incentive awards that had been paid to executives based on financial or
operating results that were subsequently restated or adjusted for any
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Executive Compensation: Compensation Discussion and Analysis
of
the three prior years. Depending on the facts and circumstances, we may also seek recovery of the excess awards from present and former non-executive managers and
employees. This policy is intended to be interpreted in a manner consistent with any applicable rules and regulations adopted by the SEC or NASDAQ as contemplated by the Dodd-Frank Act and
any other applicable law and shall otherwise be interpreted in the best business judgment of the Company and the Committee.
Accounting and Tax Considerations
Base salaries and cash bonuses are generally considered taxable income to the executive and compensation expense to the Company when earned. We have
no agreements, arrangements or other programs that provide tax gross-ups, other than for reimbursement for certain types of expenses under our relocation program that are treated as
taxable income for the recipient.
Accounting for Savings and Pension Plans:
Under Section 401(k) of the Code, which applies to the 401(k) Savings Plan, and Section 409A of the Code,
which applies to the Restoration Savings Plan, the Restoration Pension Plan and the Executive Savings Plan, executive and Company contributions to the plans are not treated as current income to the
executive. The related income taxes are deferred until the amounts are paid out to the executive, typically upon termination of employment. Further, for tax purposes, the Company defers recognition of
the compensation expense for the executives' contributions to the Section 409A plans until payout.
Accounting for Stock Awards:
We record compensation expense for performance RSUs and stock options on a straight-line basis over the service period of
up to three years, based upon the fair value of the award on the grant date, and adjusted for anticipated payout percentages related to the achievement of performance targets and reduced for
forfeitures
in
accordance with the Financial Accounting Standards Board's accounting standard for stock compensation.
Deductible Compensation:
The Committee considers the potential impact of Section 162(m) of the Code on compensation decisions.
Section 162(m)
disallows a tax deduction by the Company for compensation exceeding $1 million in any taxable year for each of the CEO and the other three highest compensated senior
executive officers, excluding the CFO. Performance-based compensation is excluded from the $1 million limitation for plans that are approved by the stockholders of the Company and that meet
certain other technical requirements; contributions to pre-tax savings plans are also excluded. Our annual bonuses, performance RSUs and stock options are intended to meet the
performance-based compensation requirements, while base salary and perquisites do not.
Based
on these requirements, the Company believes it is entitled to a tax deduction for compensation paid to executive officers during 2012, other than an estimated $800,000 of base salary and
perquisites for Messrs. White and Churchill. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m), we can give no assurance that
compensation intended to satisfy the requirements for deductibility does, in fact, do so.
Compensation
arrangements that are not fully deductible have been considered by the Committee from time to time, and may be considered in the future. While accounting and tax treatment are relevant
compensation issues, the Committee believes that stockholder interests are best served by not restricting flexibility in designing compensation programs, even though such programs may result in
non-deductible compensation expenses for tax purposes.
51
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DIRECTV
|
No Material Inappropriate Risks in Executive and Employee
Compensation Programs
|
We
are aware of the focus on the possible relationship between risk and incentive compensation in light of management's responsibility to manage risk. It is not possible to continue to increase the
revenues of the Company and enhance long-term stockholder value without assuming some reasonable level of risk. We can identify, manage and monitor the risks, but not eliminate them. For
more information about the role of our Board in risk management oversight, please see page 15.
Understanding
and managing risk extends to our executive and employee compensation programs, which include base salaries, variable pay consisting of annual performance-based bonuses and
long-term incentives, as well as employee benefits such as savings, retirement and medical plans, and perquisites such as the complimentary DIRECTV programming that we provide our
employees.
We
have evaluated our compensation programs and believe that our compensation programs do not create issues that are reasonably likely to have a material adverse effect on the Company. We base this
opinion, in part, on a number of key points.
-
-
Independent Review
In 2011, the independent Consultant
reviewed our incentive programs and found no program features that might encourage management to incur significant risk to the Company. The Committee reviewed the Consultant's report and concurred
with that conclusion. There were no material changes to our programs during 2012.
-
-
Regular Monitoring
A significant portion of employee and
executive compensation is variable and performance based. Our Compensation Committee designs, administers or provides oversight to these programs and reviews performance forecasts during the year and
performance results at the end of the year.
-
-
The
Consultant advises the Committee. Different Company departments monitor the performance results during the year, including Finance,
Accounting, Legal and Human Resources.
-
-
Overlapping Performance Periods and Alignment with Long Term
Growth
We operate concurrent annual and three-year performance programs to balance the risk of short-term focus over
longer-term results. To encourage and reward sustained performance improvements, a significant portion of middle and senior management's variable compensation is based on measuring Company
performance over multiple years before determining the payouts. The specific performance targets are aligned with the annual and longer-term business plans that we present to the Board
each year.
-
-
Checks and Balances
Our incentive program designs include
features that provide checks on excessive payouts, such as maximum performance and payout caps; that require threshold performance levels to earn the minimum incentive payment; and that provide the
Company with the ability to recover incentive payments when financial or operating results are restated. The Compensation Committee may, in its sole discretion, reduce, but not increase, the payouts
for each variable pay program for the NEOs in order to incorporate performance results other than those directly measured by the variable pay program.
-
-
Delayed Payouts After
Termination of Employment
Executives
and managers whose employment terminates due to disability, retirement or involuntary termination without cause may retain eligibility for a portion of bonuses and RSUs, however the scheduled payment
date generally remains at the end of the full performance period and is not accelerated.
52
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Executive Compensation: No Inappropriate Risks
-
-
Further,
these performance awards generally continue to be subject to adjustment for Company performance until the end of the performance
period; in some cases, this may be up to two years following termination of employment. Executives and managers who resign or are terminated by us for cause generally forfeit all bonuses and RSUs.
-
-
Significant Stock Ownership Among Our Executives
To align our
top executives'
-
-
compensation
and personal net worth with stockholder interests in increasing the value of the Company, a significant portion of the variable
compensation is paid in shares of stock and we require the executive to own a significant amount of Company stock until the executive's employment by the Company ceases. It is our policy that
executives may not hedge the economic risk of owning our stock or pledge shares.
53
Table of Contents
DIRECTV
|
5. 2012 Summary Compensation Table and Related Tables
|
The
2012 Summary Compensation Table shows the compensation paid or accrued by the Company for the NEOs. Please note the discussion and interpretation of Mr. White's
multi-year stock grant in the section titled "Stock Awards and Option Awards" on page 55.
2012 Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
Position
(a)
|
|
Year
(b)
|
|
Salary
($)
(c)
|
|
Stock
Awards
($)
(d)
|
|
Option
Awards
($)
(e)
|
|
Non-Equity
Incentive Plan
Compensation
($)
(f)
|
|
Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Plan Earnings
($)
(g)
|
|
All Other
Compensation
($)
(h)
|
|
Total
($)
(i)
|
|
Michael White
|
|
|
2012
|
|
|
1,555,782
|
|
|
0
|
|
|
12,000,106
|
|
|
4,000,000
|
|
|
163,421
|
|
|
323,957
|
|
|
18,043,266
|
|
Chairman,
|
|
|
2011
|
|
|
1,517,769
|
|
|
0
|
|
|
0
|
|
|
3,900,000
|
|
|
201,320
|
|
|
317,989
|
|
|
5,937,078
|
|
President and Chief
Executive Officer
|
|
|
2010
|
|
|
1,448,077
|
|
|
14,690,396
|
|
|
12,497,196
|
|
|
4,000,000
|
|
|
0
|
|
|
296,949
|
|
|
32,932,618
|
|
Patrick Doyle
|
|
|
2012
|
|
|
821,162
|
|
|
1,306,387
|
|
|
391,885
|
|
|
926,000
|
|
|
1,350,721
|
|
|
81,069
|
|
|
4,877,224
|
|
Executive Vice
|
|
|
2011
|
|
|
800,020
|
|
|
1,557,201
|
|
|
0
|
|
|
749,000
|
|
|
860,193
|
|
|
81,677
|
|
|
4,048,091
|
|
President and
Chief Financial Officer
|
|
|
2010
|
|
|
792,332
|
|
|
1,279,883
|
|
|
0
|
|
|
775,000
|
|
|
515,875
|
|
|
84,269
|
|
|
3,447,359
|
|
Bruce Churchill
|
|
|
2012
|
|
|
1,389,634
|
|
|
5,375,579
|
|
|
612,521
|
|
|
2,428,000
|
|
|
178,911
|
|
|
160,926
|
|
|
10,145,571
|
|
Executive Vice
|
|
|
2011
|
|
|
1,332,500
|
|
|
1,929,243
|
|
|
0
|
|
|
2,308,000
|
|
|
186,510
|
|
|
150,941
|
|
|
5,907,194
|
|
President and
President DIRECTV
Latin America and
New Enterprises
|
|
|
2010
|
|
|
1,327,500
|
|
|
1,848,346
|
|
|
0
|
|
|
2,270,000
|
|
|
184,146
|
|
|
168,023
|
|
|
5,798,015
|
|
Larry Hunter
|
|
|
2012
|
|
|
1,088,472
|
|
|
1,741,850
|
|
|
522,509
|
|
|
1,185,000
|
|
|
2,221,526
|
|
|
98,744
|
|
|
6,858,101
|
|
Executive Vice
|
|
|
2011
|
|
|
1,025,024
|
|
|
1,865,442
|
|
|
0
|
|
|
1,170,000
|
|
|
1,594,889
|
|
|
116,077
|
|
|
5,771,432
|
|
President and
General Counsel
|
|
|
2010
|
|
|
1,021,176
|
|
|
1,804,611
|
|
|
0
|
|
|
1,230,000
|
|
|
1,453,863
|
|
|
116,347
|
|
|
5,625,997
|
|
Michael Palkovic
|
|
|
2012
|
|
|
896,168
|
|
|
1,350,171
|
|
|
405,015
|
|
|
794,000
|
|
|
1,036,121
|
|
|
79,654
|
|
|
4,561,129
|
|
Executive Vice
|
|
|
2011
|
|
|
873,774
|
|
|
1,674,126
|
|
|
0
|
|
|
735,000
|
|
|
685,927
|
|
|
81,950
|
|
|
4,050,777
|
|
President,
Operations
|
|
|
2010
|
|
|
843,054
|
|
|
1,419,594
|
|
|
0
|
|
|
810,000
|
|
|
391,866
|
|
|
87,195
|
|
|
3,551,709
|
|
Romulo Pontual
|
|
|
2012
|
|
|
925,720
|
|
|
1,240,143
|
|
|
372,008
|
|
|
780,000
|
|
|
81,418
|
|
|
85,097
|
|
|
3,484,386
|
|
Executive Vice
President,
Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officerscolumn (a)
Mr. White is the Chief Executive Officer, Mr. Doyle is the Chief Financial Officer and Messrs. Churchill,
Hunter, Palkovic and Pontual are the other NEOs. Mr. Palkovic was an elected officer of the Company through February 2012 and, under SEC rules, we have included him in this 2012 report.
Mr. White
is also a director and Chairman of the Company, but earns no additional
compensation
in that capacity. Charitable matching contributions in Mr. White's name under the Company's charitable contribution program (discussed on page 24) are reported in
column (h), All Other Compensation, which is discussed on page 56.
Salarycolumn (c)
The amounts shown in column (c) include amounts that the executive may have contributed to the 401(k) Savings Plan, the
54
Table of Contents
Executive Compensation: 2012 Summary Compensation Table
Restoration
Savings Plan and the Executive Savings Plan. The base salary amounts differ from the amounts shown in Supplementary Chart 15 on page 46 due to the timing of salary increases
(generally in the first calendar quarter of the year, and not always on January 1).
Stock Awards and Option Awardscolumns (d) and (e)
The amounts shown in columns (d) and (e) represent the grant date fair value of stock-based incentive compensation grants.
-
-
Mr. White's 2010 RSU and stock option grants were in the form of a single "up front" multi-year
incentive grant, valued at approximately $9.1 million per year during the three-year term of his employment agreement. The 2010 values shown in the Table for Mr. White are
best interpreted on an annualized basis rather than a one-time aggregate value in order to permit fair comparison to the value of the stock grants made annually to the other NEOs.
-
-
As
part of Mr. White's new employment arrangements discussed in our Form 8-K filed with the SEC
on November 2, 2012, (the November 2012 8-K), on November 7, 2012, he was awarded a stock option for 706,720 shares of stock that vests on December 31, 2015. The
option was valued at $12 million using the Black-Scholes valuation method at the date of the award.
-
-
The 2012 RSUs for the other NEOs were granted on February 9, 2012 and are
valued in column (d) at the $45.56
per share closing price of the Common Stock on that date.
-
-
The 2012 stock options for the other NEOs were granted on February 17, 2012 and are valued in column (e) at
the $44.98 per share closing price of the Common Stock on that date.
For
a discussion of the assumptions made in the valuation of the amounts shown in columns (d) and (e), refer to Note 17: Share-Based Payment of the Notes to the
Consolidated
Financial Statements of Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on February 21, 2013 (the 2012
10-K). For additional information about these awards, see the 2012 Grants of Plan-Based Awards Table and related discussion beginning on page 58.
The
maximum amounts of the target stock awards granted in 2012 as shown in column (d), valued at the grant date price per share and assuming (i) achievement of the maximum 150% of the
three-year performance goals ending December 31, 2014, and (ii) no increase in stock price, are: Mr. Doyle, $1,959,581; Mr. Churchill, $8,063,368;
Mr. Hunter, $2,612,775; Mr. Palkovic, $2,025,256, and Mr. Pontual, $1,860,215.
Non-Equity Incentive Compensationcolumn (f)
The amounts shown in column (f) represent performance-based bonuses earned under the Bonus Plan for performance during 2012,
but actually paid in 2013, and include amounts that the executive may have contributed to the 401(k) Savings Plan, the Restoration Savings Plan and the Executive Savings Plan.
Change in Pension Value and Non-qualified Deferred Compensation Plan Earningscolumn (g)
The amounts shown in column (g) are the change in value of each NEO's accumulated pension benefit as of December 31,
2012 compared to December 31, 2011. Mr. White commenced pension plan participation in 2011 and had no pension benefits accrued or earned in 2010. Refer to Note 14: Pension and
Other Postretirement Benefit Plans of the Notes to the Consolidated Financial Statements of our 2012 10-K for a discussion of the assumptions made in the valuation of the amounts shown.
For additional information about the pension plan, see "Understanding the 2012 Pension Benefits Table" on page 66.
55
Table of Contents
DIRECTV
The
amounts in column (g) do not include any earnings in non-qualified deferred compensation plans because none of the earnings in those plans exceed market rates. For additional
information about the non-qualified deferred compensation plans and the earnings for those plans, see "Understanding the 2012 Non-Qualified Deferred Compensation Table" on
page 69.
All Other Compensationcolumn (h)
The Company provides health and welfare benefit plans to its employees and executive officers that are comparable to benefits provided by other major
companies, including
medical,
dental and vision care; life insurance and dependent life insurance; accidental death and dismemberment insurance; short-term and long-term disability
insurance; and paid time-off for vacations, illness, matching contributions for charitable or political action committee contributions, holidays and other personal needs. Because we
provide these health and welfare benefit programs to all employees generally, the value of these programs is excluded from this column.
Supplementary
Chart 16 provides details on the amounts disclosed in column (h).
Supplementary Chart 16All Other Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Perquisites and
Other Personal
Benefits
($)
(b)
|
|
Company Matching
Contributions to
Defined Contribution
Savings Plans
($)
(c)
|
|
Other
($)
(d)
|
|
Total
($)
(e)
|
|
Michael White
|
|
|
71,904
|
|
|
227,656
|
|
|
24,397
|
|
|
323,957
|
|
Patrick Doyle
|
|
|
4,137
|
|
|
72,994
|
|
|
3,938
|
|
|
81,069
|
|
Bruce Churchill
|
|
|
4,137
|
|
|
152,921
|
|
|
3,868
|
|
|
160,926
|
|
Larry Hunter
|
|
|
4,174
|
|
|
91,146
|
|
|
3,424
|
|
|
98,744
|
|
Michael Palkovic
|
|
|
4,137
|
|
|
71,856
|
|
|
3,661
|
|
|
79,654
|
|
Romulo Pontual
|
|
|
4,137
|
|
|
67,384
|
|
|
13,576
|
|
|
85,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites and Other Personal Benefitscolumn (b)
The Company does not provide tax gross ups or reimbursements, executive medical, car allowances, tax or financial planning, or club
memberships. For the following few perquisites that we do provide, the Company follows IRS guidelines to report the value as income to the executive and withhold the appropriate taxes from the
executive's pay.
The
amounts in column (b) of Supplementary Chart 16 include the personal use of Company aircraft and Company-paid premiums for
long-term
disability insurance and personal liability insurance. Tickets to sporting and other entertainment events are sometimes provided, without charge, to certain employees, including
the NEOs, to attend these events for business purposes. Tickets are made available to employees, including the NEOs, for personal use only if the tickets are not otherwise needed for business use. The
Company does not incur incremental costs with respect to personal use of these tickets because the tickets were purchased by the Company for business purposes.
56
Table of Contents
Executive Compensation: 2012 Summary Compensation Table
The
Company owns a plane that is available to NEOs for business travel. When not needed for business travel, the plane is available for personal use on a limited basis and only as approved by the CEO.
The Board encourages the CEO to use the Company plane even for personal travel to ensure his personal safety and maximize his availability for Company business. For Mr. White, the amount shown
includes $67,767 for personal use of the Company plane. This is the incremental cost to the Company including the average cost of fuel, in-flight catering, landing, hangar and parking
fees, other variable fees and crew travel expenses. Because the Company uses the plane primarily for business travel, we do not include ownership costs or aircraft maintenance expenses that do not
change based on usage.
We
provide long-term disability insurance equal to 60% of base salary and personal liability insurance with a coverage limit of $10 million, both at no cost to a limited number of
executives, including all of the NEOs.
Executive
officers may also receive post-employment benefits, which are discussed in "Potential Payments upon Termination or Change in Control" beginning on page 72.
Company-Matching Contributions to Savings Planscolumn (c)
The amounts shown in column (c) of Supplementary Chart 16 include Company matching contributions to three savings plans, the 401(k)
Savings Plan, the Restoration Savings Plan and the Executive Savings Plan. The Company-matching contributions for executives in the 401(k) and Restoration savings plans are determined by the same
rules as company matching of employees' contributions generally. In 2012, the matching contributions to the 401(k) Savings Plan
were
$14,595 for Mr. White; $10,300 for Mr. Doyle; $10,000 for Mr. Churchill; $9,946 for Mr. Hunter; $10,518 for Mr. Palkovic, and $9,183 for Mr. Pontual. In
2012, the Company matching contributions to the Restoration Savings Plan were $213,061 for Mr. White; $62,694 for Mr. Doyle; $142,921 for Mr. Churchill; $81,200 for
Mr. Hunter; $61,338 for Mr. Palkovic, and $58,201 for Mr. Pontual. In 2012, there were no matching contributions to the Executive Savings Plan for any of the NEOs.
Othercolumn (d)
The amounts shown in column (d) of Supplementary Chart 16 include:
-
-
Complimentary Programming
We provide all
full-time employees with complimentary DIRECTV programming (including home installation) at the Premier level, plus local channels and a variety of premium programming packages. The
NEOs also receive a DIRECTV HD DVR, and all other channels (including all subscription channels and HD).
-
-
Matching Charitable Contributions
Company-matching
contributions to charities and political action committees are broad-based programs available to all employees and management and, under SEC rules, are not disclosed for individual NEOs. However, SEC
rules also require disclosure of matching contributions for Mr. White as a director. "Other" in column (d) includes Mr. White, $20,000 in matching contributions for
Mr. White's contributions to qualifying charities. For more information, see "Payments and Promises of Payments Pursuant to Director Legacy Programs and Similar Charitable Award Programs" on
page 24.
57
Table of Contents
DIRECTV
|
2012 Grants of Plan-Based Awards
|
The
2012 Grants Of Plan-Based Awards Table and the discussion following the table describe awards made under the Bonus Plan for 2012 and the award of RSUs under the 2010 Stock Plan.
2012 Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity
Incentive Plan Awards
|
|
|
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
or
Base Price
of Option
Awards
($/SH)
(j)
|
|
Grant Date
Fair Value
of Stock
and
Option
Awards
($)
(k)
|
|
Name
(a)
|
|
Grant
Date
(b)
|
|
|
|
Threshold
($)
(c)
|
|
|
|
Target
($)
(d)
|
|
|
|
Maximum
($)
(e)
|
|
|
|
Threshold
(#)
(f)
|
|
|
|
Target
(#)
(g)
|
|
|
|
Maximum
(#)
(h)
|
|
|
|
|
|
|
|
Michael White
|
|
|
2/9/12
|
|
|
|
|
0
|
|
|
|
|
3,124,000
|
|
|
|
|
7,810,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Doyle
|
|
|
2/9/12
|
|
|
|
|
0
|
|
|
|
|
825,000
|
|
|
|
|
1,650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Churchill
|
|
|
2/9/12
|
|
|
|
|
0
|
|
|
|
|
2,100,000
|
|
|
|
|
4,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry Hunter
|
|
|
2/9/12
|
|
|
|
|
0
|
|
|
|
|
1,100,000
|
|
|
|
|
2,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Palkovic
|
|
|
2/9/12
|
|
|
|
|
0
|
|
|
|
|
720,000
|
|
|
|
|
1,440,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Romulo Pontual
|
|
|
2/9/12
|
|
|
|
|
0
|
|
|
|
|
744,000
|
|
|
|
|
1,488,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael White
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Patrick Doyle
|
|
|
2/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
28,674
|
|
|
|
|
43,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,306,387
|
|
Bruce Churchill
|
|
|
2/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
117,989
|
|
|
|
|
176,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,375,579
|
|
Larry Hunter
|
|
|
2/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
38,232
|
|
|
|
|
57,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,741,850
|
|
Michael Palkovic
|
|
|
2/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
29,635
|
|
|
|
|
44,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,350,171
|
|
Romulo Pontual
|
|
|
2/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
27,220
|
|
|
|
|
40,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,240,143
|
|
Michael White
|
|
|
11/7/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
706,720
|
|
|
|
|
49.49
|
|
|
|
|
12,000,106
|
|
Patrick Doyle
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,145
|
|
|
|
|
44.98
|
|
|
|
|
391,885
|
|
Bruce Churchill
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,117
|
|
|
|
|
44.98
|
|
|
|
|
612,521
|
|
Larry Hunter
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,193
|
|
|
|
|
44.98
|
|
|
|
|
522,509
|
|
Michael Palkovic
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,155
|
|
|
|
|
44.98
|
|
|
|
|
405,015
|
|
Romulo Pontual
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,616
|
|
|
|
|
44.98
|
|
|
|
|
372,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-Year Performance Period (2012): Estimated Future Payouts Under Non-Equity Incentive Plan Awardscolumns (c), (d) and (e)
The amounts shown in columns (c), (d) and (e) show the range of potential 2012 annual bonus amounts. We use the annual
bonuses to focus the NEOs on financial and operating results over the course of the year. Elected officers are the only participants in the Bonus Plan. The target value of an executive's bonus
(assuming achievement of 100% of the performance goals) is based on the percentage of base salary set by the Committee. The Committee sets the maximum
bonus
amount that may be earned by each elected officer at the beginning of the performance period. The maximum 2012 Bonus Plan fund was $7.8 million for the CEO, and two times
the target bonus for each of the other NEOs. Achieving target level performance provides a target level bonus. Performance that is below target reduces the bonus. Performance above target increases
the bonus up to the maximum. The 2012 performance measure and the maximum funding formulas are discussed beginning on page 36. The Committee may reduce, but not increase, a bonus earned at the
end of the performance period based on its evaluation of
58
Table of Contents
Executive Compensation: 2012 Grants of Plan Based Awards
Company
and individual performance. The amounts actually earned and paid to the NEOs for 2012 are shown in the 2012 Summary Compensation Table in column (f) on page 54.
Three-year Performance Period (2012-2014): Estimated Future Payouts Under Equity Incentive Plan Awardscolumns (f), (g) and (h)
The amounts shown in columns (f), (g) and (h) represent the number of performance-based RSUs granted in 2012. The RSUs
promote the long-term growth of the Company and increasing stockholder value. When the Committee determined the target 2012 equity award value for each NEO, other than the CEO, the award
value was allocated as 75% performance-based RSUs and 25% stock options.
2012-2014 Performance-based RSUs
The target RSU award value was converted to RSUs based on the estimated value of the stock preceding the grant date.
When RSUs are granted, the Committee also sets the maximum number of RSUs that may be earned by each elected officer at the end of the three-year performance period. The maximum number of
shares that may be earned in the 2012-2014 RSU Plan is 150% of the target number of shares. At the Committee's discretion, RSU awards may be paid in cash in lieu of stock.
The
three-year performance period is January 1, 2012 to December 31, 2014. Elected officers are the only participants in this plan, while other executives and senior
management participate in a similar, but separate, plan with the same performance measures. The 2012-2014 RSUs were granted with dividend equivalents, which would provide additional value
if the Company pays dividends during the three-year performance period. The dividend equivalents
would
be paid or cancelled in the same manner and at the same time as the underlying RSUs are paid or cancelled at the end of the three-year performance period. The
dividend equivalents would be payable as cash, but we reserve the right to convert the payment to shares.
The
Committee grants long-term stock-based incentives to executives annually, typically during the first quarter of the calendar year and at the same time as it sets performance goals for
the year. A new three-year performance plan is established and RSUs are granted each year to participants, resulting in three such plans operating concurrently at any one time after the
first two years.
Achieving
target level performance provides a target level stock payout. Performance that is below target reduces the payout and performance above target increases the payout up to the maximum. The
value of the share payout also depends on the market value of the shares at the end of the three-year performance period. No stock is issued until (i) the performance measurement
period is completed, (ii) the Committee determines the actual level of performance, and (iii) the Committee determines the number of RSUs to be converted
one-for-one into shares of Common Stock to be issued to each executive. The Committee may reduce, but not increase, the number of shares earned at the end of the performance
period based on its evaluation of Company and individual performance. The 2012-2014 RSU performance measures and the performance and payout ranges are discussed beginning on
page 40. There were no modifications to any current or previous stock awards made to the NEOs.
In
addition to the 2012 annual equity award, Mr. Churchill was awarded a separate 3-year performance-based RSU award with a $3 million target value or 73,171 shares, which is
included in the 117,989 shares listed in column (g) above. This was awarded in recognition of the past sustained growth achieved at DTVLA and as an incentive for Mr. Churchill to
continue that significant growth at DTVLA. This award was made at the same time and with the same performance standards
59
Table of Contents
DIRECTV
as
the 2012-2014 performance-based RSUs described above, and is not expected to be awarded in future years.
All Other Option Awards: Number of Securities Underlying Options and Exercise Pricecolumns (i) and (j)
The amounts shown in columns (i) and (j) are the numbers of stock options awarded during 2012 and the related exercise
price per share. Except for Mr. White, the NEOs' options vest and become exercisable at the rate of one-third of the awarded number of options each year for 3 years.
Mr. White's options do not vest and become exercisable until December 31, 2015. The options for each NEO may vest and become exercisable earlier as discussed in "Potential Payments upon
Termination or Change in Control" on page 72. The options expire after ten years or earlier under certain terminations of employment. The options were awarded without dividend equivalents. The
options have value or are "in-the-money" when the current stock market price for DIRECTV common stock exceeds the exercise price. The options have no value or are "underwater"
when the current stock market price is less than the exercise price.
Grant Date Fair Value of Stock and Option Awardscolumn (k)
The amounts shown in column (k) represent the fair value of the 2012 RSU and stock option awards on the grant date, and assume
-
-
The RSUs in column (g) were granted to the NEOs other than Mr. White on February 9, 2012, and are
valued in column (k) at the $45.56 per share closing price of the Common Stock on that date. This valuation does not include any potential value for dividend equivalents, because the Company
currently does not pay dividends. Similarly, the 2012 Summary Compensation Table on page 54 does not include any potential value for dividend equivalents.
-
-
The stock options to the
NEOs other than Mr. White were awarded on February 17, 2012, after the release of
the 2011 annual earnings report, so that any stock price changes resulting from the earnings release were assumed to be incorporated in the exercise price of the stock options. Mr. White's
stock options were awarded on November 7, 2012, after the release of the third quarter 2012 earnings report, as part of Mr. White's new 2013 employment arrangements discussed in the
November 2012 8-K. The option exercise price for each NEO is the market closing price on the award date. The previously approved target award value was converted to the number of options
awarded based on the Black-Scholes value determined as of the award date and using the closing market price on that date.
60
Table of Contents
Executive Compensation: Agreements with Executive Officers
|
Agreements with Executive Officers
|
Michael White
No Employment Agreement
The Committee had previously decided to phase out employment contracts among the top executives, even though employment contracts are
frequently found in the media benchmark group. Mr. White agreed to forego a new contract and serves at the Board's discretion after his existing contract lapsed on January 1, 2013.
Previous Employment Agreement with Michael White through December 31, 2012
Mr. White
was elected as President and CEO of the Company effective January 1, 2010, and Chairman of the Board on June 17, 2010. The following describes his previous compensation
agreement.
Term
The term of the agreement was for three years from January 1, 2010 through January 1, 2013, which has lapsed.
Base Salary
Mr. White initially received a base salary of $1,500,000 per year, subject to annual adjustment.
Annual Cash Bonus
Mr. White was eligible to receive an annual performance bonus. The target annual bonus was 200% of his base salary for the applicable
year.
Equity Compensation
The agreement provided for a stock grant to Mr. White valued at $25 million using the valuation methods provided in the
agreement, consisting of 50% of value in stock options with three-year installment vesting on each of December 31, 2010, 2011 and 2012, and 50% of value in RSUs which vested at the
end of the three-year performance period. In accordance with the terms of the agreement, on January 4, 2010 Mr. White was awarded options to purchase
1,011,100
shares of Common Stock with an exercise price of $33.74, the closing price per share of DIRECTV Common Stock on that date. On January 4, 2010, Mr. White was
also awarded 435,400 performance-based RSUs that vested on December 31, 2012, subject to the same three-year performance standards set for all other NEOs for the
2010-2012 RSU grants. The vested RSUs converted to shares of Common Stock, but will not be distributed until a date following his termination of employment under the terms of his
agreement.
Noncompetition and Confidentiality
Mr. White agreed not to compete with the Company during the term of his employment and for 24 months thereafter.
He also agreed, during the term of his employment and for two years thereafter, not to induce or solicit any executive, professional or administrative employee of the Company or its affiliates to
leave or to induce any key programming or equipment supplier or key distributor, to terminate or materially adversely change its relationship with the Company or its affiliates. Further,
Mr. White is required to maintain the confidentiality of certain information of the Company, and not to use such information except for the benefit of the Company.
Other Terms
Other terms and conditions in the Employment Agreement were commensurate with other elected officers at the Company.
Employment Agreements with Other NEOs
We
had previously entered into employment agreements with each of the other NEOs. For Messrs. Doyle, Churchill, Hunter and Pontual, the prior employment agreements expired on
December 31, 2011, and no new employment agreements were executed. Each executive continued employment on an "at will" basis.
61
Table of Contents
DIRECTV
Mr. Palkovic
had an employment agreement that would have expired December 31, 2013. In February 2013, Mr. Palkovic voluntarily agreed to an early cessation of his employment
agreement.
Currently,
no NEO has an employment agreement
The
following describes material terms of the prior agreement with Mr. Palkovic.
Term
The term of Mr. Palkovic's agreement was from November 12, 2010 through December 31, 2013.
Base Salary
Mr. Palkovic's 2012 base salary was shown in Supplementary Chart 15 on page 46 and was subject to increase at the discretion of
the Company, commensurate with the other senior executives of the Company, with the actual salary increase subject to the Committee's approval.
Annual Cash Bonus
Mr. Palkovic was eligible to receive an annual performance bonus, payable in cash. The bonus was based on achievement of performance
goals, standards contained in the Bonus Plan, recommendation of the CEO and approval by the Compensation Committee. For the term of the agreement, the target bonus opportunity percentage was not less
than 80% for Mr. Palkovic. The 2012 target bonus opportunity as a percentage of Mr. Palkovic's base salary is shown in Supplementary Chart 15 on page 46.
Equity Awards
The equity award granted to Mr. Palkovic under the agreement was determined annually and had a grant date fair market value not less than 180%
of his base
salary.
For 2012, 75% of the equity award value was allocated as performance-based RSUs and 25% as stock options. The 2012 equity award for Mr. Palkovic is shown in
Supplementary Chart 15 on page 46 and the 2012 Grants of Plan-Based Awards Table on page 58.
Noncompetition and Confidentiality
Mr. Palkovic was subject to terms and conditions by which certain payments would be forfeited if he failed to comply with
either of the following during the term of his employment and for 12 months thereafter: (i) requirement not to compete with the Company, or (ii) with restrictions on inducing or
soliciting employees of the Company or its affiliates to leave such employment. Further, Mr. Palkovic was required to maintain the confidentiality of certain information of the Company and not
to use such information except for the benefit of the Company. The Executive Severance Plan, applicable to Mr. Palkovic following the termination of the employment agreement, has similar
restrictions and is discussed further at Potential Payments upon Termination or Change in Control on page 72.
Termination
For Mr. Palkovic, the terms and conditions for compensation upon termination of employment are no longer applicable and the applicable values
under the Executive Severance Plan are summarized in the section "Potential Payments upon Termination or Change in Control" beginning on page 72. Mr. White participates in the CEO
Severance Plan and Messrs. Doyle, Churchill, Hunter and Pontual participate in the Executive Severance Plan.
62
Table of Contents
Executive Compensation: Outstanding Equity Awards
|
2012 Outstanding Equity Awards at Fiscal Year-End
|
This
table and the discussion following provide information on all equity awards granted to the NEOs that were outstanding as of the end of 2012.
2012 Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
Name
(a)
|
|
|
|
Grant
Date
(b)
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(c)
|
|
Number of
Securities
Underlying
Unexercised
Options(1)
(#)
Unexercisable
(d)
|
|
Option
Exercise
Price
($)
(e)
|
|
Option
Expiration
Date
(f)
|
|
Option
Value at
Year-End
($)
(g)
|
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
that Have
Not Vested
(#)
(h)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that Have
Not Vested
($)
(i)
|
Mike White
|
|
|
|
11/07/12
|
|
|
|
0
|
|
706,720
|
|
49.49
|
|
11/07/22
|
|
473,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
0
|
|
706,720
|
|
|
|
|
|
473,502
|
|
|
|
0
|
|
0
|
Patrick Doyle
|
|
|
|
2/10/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,598(2)
|
|
2,688,476
|
|
|
|
|
2/09/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,011(3)
|
|
2,157,432
|
|
|
|
|
2/17/12
|
|
|
|
10,048
|
|
20,097
|
|
44.98
|
|
2/17/22
|
|
156,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
10,048
|
|
20,097
|
|
|
|
|
|
156,151
|
|
|
|
96,609
|
|
4,845,908
|
Bruce Churchill
|
|
|
|
2/10/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,404(2)
|
|
3,330,825
|
|
|
|
|
2/09/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176,984(3)
|
|
8,877,517
|
|
|
|
|
2/17/12
|
|
|
|
15,705
|
|
31,412
|
|
44.98
|
|
2/17/22
|
|
244,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
15,705
|
|
31,412
|
|
|
|
|
|
244,066
|
|
|
|
243,388
|
|
12,208,342
|
Larry Hunter
|
|
|
|
2/10/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,208(2)
|
|
3,220,673
|
|
|
|
|
2/09/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,348(3)
|
|
2,876,576
|
|
|
|
|
2/17/12
|
|
|
|
13,397
|
|
26,796
|
|
44.98
|
|
2/17/22
|
|
208,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
13,397
|
|
26,796
|
|
|
|
|
|
208,200
|
|
|
|
121,556
|
|
6,097,249
|
Mike Palkovic
|
|
|
|
2/10/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,623(2)
|
|
2,890,370
|
|
|
|
|
2/09/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,453(3)
|
|
2,229,762
|
|
|
|
|
2/17/12
|
|
|
|
10,385
|
|
20,770
|
|
44.98
|
|
2/17/22
|
|
161,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
10,385
|
|
20,770
|
|
|
|
|
|
161,383
|
|
|
|
102,076
|
|
5,120,132
|
Romulo Pontual
|
|
|
|
2/10/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,708(2)
|
|
2,092,073
|
|
|
|
|
2/09/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,830(3)
|
|
2,048,033
|
|
|
|
|
2/17/12
|
|
|
|
9,538
|
|
19,078
|
|
44.98
|
|
2/17/22
|
|
148,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
9,538
|
|
19,078
|
|
|
|
|
|
148,231
|
|
|
|
82,538
|
|
4,140,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Other
than Mr. White, the unvested stock options vest 50% on December 31, 2013 and 50% on December 31, 2014. Mr. White's
November 7, 2012 option vests 100% on December 31, 2015, with no scheduled interim vesting.
-
(2)
-
For
performance-based RSUs granted in 2011 with a performance period of January 1, 2011 to December 31, 2013 (which is also the vesting date),
the number of shares is shown at the maximum payout level because the current cumulative performance is between target and maximum performance levels. At target performance levels, the number of
shares would be 35,732 for Mr. Doyle; 44,269 for Mr. Churchill; 42,805 for Mr. Hunter; 38,415 for Mr. Palkovic; and 27,805 for Mr. Pontual.
-
(3)
-
For
performance-based RSUs granted in 2012 with a performance period of January 1, 2012 to December 31, 2014 (which is also the vesting date),
the number of shares is shown at the maximum payout level because the current cumulative performance is between target and maximum performance levels. At target performance levels, the number of
shares would be 28,674 for Mr. Doyle; 117,989 for Mr. Churchill; 38,232 for Mr. Hunter; 29,635 for Mr. Palkovic; and 27,220 for Mr. Pontual.
63
Table of Contents
DIRECTV
Columns
(c), (d), (e), (f) and (g) show information for stock options.
Column
(h) shows outstanding RSU grants whose three-year performance periods are still in progress and not yet ended.
The
values of the stock options are shown in column (g) and the values of the unvested RSUs are shown in column (i) based on the $50.16 per share closing stock price on
December 31, 2012. The actual value of each stock option and RSU grant varies with the stock price and, for RSUs, also with the Company's performance against the targets.
The
information in columns (g) and (i) of this table is related to the information in the 2012 Summary Compensation Table, columns (e) and (d) respectively, on
page 54. All outstanding awards at year-end are shown in columns (g) and (i) of this table at the closing market price of $50.16 per share on December 31, 2012
and, for RSUs, adjusted for cumulative actual performance. The Stock Awards and Option Awards values shown in the 2012 Summary Compensation Table, columns (d) and (e) respectively, on
page 54, represent the 2012 grant date values for equity awards granted in 2012 and, for RSUs, assume 100% performance.
64
Table of Contents
Executive Compensation: 2012 Option Exercises and Stock Vested
|
2012 Option Exercises and Stock Vested
|
This
table and the notes following provide additional information regarding the compensation realized by the executives in 2012 due to the exercise of stock options and the acquisition of shares upon
the distribution of RSUs.
2012 Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
Name
(a)
|
|
Number of Shares
Acquired on
Exercise
(#)
(b)
|
|
|
|
Value Realized
on
Exercise
($)
(c)
|
|
|
|
Number of
Shares
Acquired on
Vesting
(#)
(d)
|
|
|
|
Value Realized
on
Vesting
($)
(e)
|
|
Michael White
|
|
|
1,011,100
|
|
|
|
|
17,999,128
|
|
|
|
|
544,250
|
|
|
|
|
26,771,658
|
|
Patrick Doyle
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
51,725
|
|
|
|
|
2,544,353
|
|
Bruce Churchill
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
74,699
|
|
|
|
|
3,674,444
|
|
Larry Hunter
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
72,932
|
|
|
|
|
3,587,525
|
|
Michael Palkovic
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
57,372
|
|
|
|
|
2,822,129
|
|
Romulo Pontual
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
46,682
|
|
|
|
|
2,296,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
Mr. White's stock options were exercised in 2012 with an "exercise and hold" methodology. That is, after withholding shares for the option
exercise price and taxes, Mr. White retained the net remaining shares.
Vested stock awards
The amounts shown in column (d) are from the 2010-2012 RSU grants and are valued in column (e) at the $49.19 per
share closing market price on February 15, 2013 when the taxable value of the shares to be distributed was determined.
Mr. White's
2010-2012 RSUs shown in column (d) were granted in 2010 and with no
subsequent
RSU awards in 2011 and 2012 during the 3-year performance term of the award, therefore, the value shown in column (e) is best interpreted as the
cumulative result of three annual performance awards.
Under
the terms of Mr. White's 2010 Performance Stock Unit Award Agreement, the 2010-2012 award payout was deferred. After shares were withheld for taxes, the remaining 518,880
vested shares valued at $25,523,707 were deferred and no shares were sold. The net shares are reported in the 2012 Non-Qualified Deferred Compensation Table on page 70.
65
Table of Contents
DIRECTV
|
Understanding the 2012 Pension Benefits Table
|
We
provide an employee pension program with total pension values allocated between two components, the Pension Plan and the Restoration Pension Plan. The Restoration Pension Plan is a benefit
restoration plan, designed to replace pension benefits that would otherwise be limited by IRS regulations for the Pension Plan. Eligibility and benefit formulas in both the Pension and Restoration
Plans are the same for employees and executives. All employees whose compensation or pension benefit exceeds legislated pay limits on the Pension Plan automatically participate in the Restoration
Pension Plan. In the pension benefit formulas, the maximum benefit amount permitted by applicable law and regulations is paid from the Pension Plan and the balance is paid from the Restoration Pension
Plan.
The
pension plans provide compensation based on an employee's length of service and pay. Pension benefits are determined, in part, using the employee's actual age and years of benefit service. Age and
length of service for the NEOs are calculated on the same basis as for other employees. In the Restoration Pension Plan, as a practice, the Company does not provide additional years of age or benefit
service and no NEO has been credited with additional years of age or benefit service.
Benefit Formulas
There
are three benefit formulas provided by the Pension Plan and the Restoration Pension Plan. Eligibility for a specific formula depends on the employee's date of hire. Each formula's benefits vest
after three years of service.
The
three benefit formulas are:
-
(i)
-
a
Contributory Benefit
that was available to employees hired prior to August 2, 1990, who elected to
participate, contribute and remain in this benefit (no NEO is eligible for this Contributory Benefit)
-
(ii)
-
a
Non-Contributory Benefit
for employees hired on or after August 2, 1990, but before
December 1, 2001, and
-
(iii)
-
a
Retirement Growth Benefit
, also called a cash balance benefit, which was established December 1,
2001 for employees hired after November 30, 2001.
Employees
who were participants in the Non-Contributory Benefit as of December 1, 2001, will receive the better of that benefit or the Retirement Growth Benefit.
The Contributory Benefit
formula is not discussed further because no NEO is eligible for that benefit.
The Non-Contributory Benefit
is a final average pay benefit using the highest five out of the last 10 years of pensionable
compensation. The Company calculates benefits as a percentage of final average monthly pay for up to 35 years of service (and a lesser percentage after 35 years of service) minus an
offset for Social Security. The resulting amount is a monthly life annuity payable at Social Security Normal Retirement Age (SSNRA), which is 65, 66 or 67 depending on the year of birth. For early
retirement within three years before the employee's SSNRA, this benefit is not reduced as long as the employee has at least ten years of continuous service on or prior to separation from service.
Otherwise, the benefit is reduced. The Company uses actuarial conversion factors to determine the benefit under different payment options (see "Forms of Benefit Payments" below).
The Retirement Growth Benefit
provides an account-balance benefit based on (a) a percentage of pensionable compensation and (b) interest.
The percentage of pensionable compensation increases by years of vesting service up to the maximum 4% per year after the employee's fifth year of service. However, for employees hired before
December 1, 2006,
66
Table of Contents
Executive Compensation: Pension Plans
the
percentage is 4% per year. The formula provides an amount payable as a lump sum. The Company uses actuarial conversion factors to determine the benefit under different payment
options.
Participation of the NEOs
Messrs. Doyle,
Hunter and Palkovic participate in the Non-Contributory Benefit, and will receive the better of the benefit under the Non-Contributory Benefit or the
Retirement Growth Benefit. Messrs. White, Churchill and Pontual participate in the Retirement Growth Benefit.
Retirement Age
The
plans assume that an employee's retirement age is the earliest of (i) the normal retirement age defined in the plan, (ii) age 65, or (iii) the earliest age when an
employee has earned an unreduced retirement benefit. Participants under the Non-Contributory Benefit and the
Retirement Growth Benefit are eligible to retire early beginning at age 55 after completing three years of service with the Company, which is when accrued benefits vest. The Plans also provide
for retirement at earlier age and service levels, but the benefit is reduced. Messrs. White, Doyle, Churchill, Hunter and Palkovic are currently eligible to retire under both the Pension Plan
and the Restoration Pension Plan.
Pensionable Compensation
In
the Pension Plan and the Restoration Pension Plan, benefits are determined using
base
salary and annual bonuses, which means that the value of a pension depends partially on achievement of business goals. Both Plans exclude the value of stock awards and all other
long-term incentive awards. There is no double counting of compensation between the two plans.
Forms of Benefit Payments
The
forms of benefit payments are similar in both of the plans. Employees may elect a different form and timing of benefit payments from each plan. Participants who terminate or retire may elect to
receive benefits as a lump sum, a single life annuity, various joint and survivor annuities, various periods certain and a 10-year period certain and continuous.
The
2012 Pension Benefits Table and the discussion preceding the table provide additional information regarding each NEO's participation in the Company's pension plans and the present value of those
benefits as of December 31, 2012. No actuarial pre-retirement decrements are used in these calculations. The benefit values were determined assuming that the NEOs will continue to
earn the same amount of salary and bonus compensation as reported in the 2012 Summary Compensation Table on page 54 until retirement. Refer to Note 14: Pension and Other Postretirement
Benefit Plans of the Notes to the Consolidated Financial Statements of our 2012 10-K, for a discussion of the assumptions made in the valuation of the amounts shown in column (d).
67
Table of Contents
DIRECTV
2012 Pension Benefits
|
|
|
|
|
|
|
|
|
|
Name (a)
|
|
Plan name
(b)
|
|
Number of
years of
credited
service
(#)
(c)
|
|
Present
Value of
Accumulated
Benefit
($)
(d)
|
|
Michael White
|
|
Pension Plan
|
|
|
3
|
|
|
25,160
|
|
|
|
Restoration Pension Plan
|
|
|
3
|
|
|
339,580
|
|
Patrick Doyle
|
|
Pension Plan
|
|
|
20
|
|
|
676,491
|
|
|
|
Restoration Pension Plan
|
|
|
20
|
|
|
3,379,485
|
|
Bruce Churchill
|
|
Pension Plan
|
|
|
9
|
|
|
110,376
|
|
|
|
Restoration Pension Plan
|
|
|
9
|
|
|
1,035,073
|
|
Larry Hunter
|
|
Pension Plan
|
|
|
18
|
|
|
853,651
|
|
|
|
Restoration Pension Plan
|
|
|
18
|
|
|
7,874,688
|
|
Michael Palkovic
|
|
Pension Plan
|
|
|
15
|
|
|
484,168
|
|
|
|
Restoration Pension Plan
|
|
|
15
|
|
|
3,012,903
|
|
Romulo Pontual
|
|
Pension Plan
|
|
|
9
|
|
|
106,256
|
|
|
|
Restoration Pension Plan
|
|
|
9
|
|
|
466,776
|
|
|
|
|
|
|
|
|
|
|
|
68
Table of Contents
Executive Compensation: Non-Qualified Deferred Compensation Plans
|
Understanding the 2012 Non-Qualified Deferred
Compensation Table
|
We
provide three savings plans for employees and executives: a 401(k) Savings Plan, a Restoration Savings Plan and the Executive Savings Plan. These savings plans are sometimes referred to as
"deferred compensation plans" because by contributing a percentage of their compensation to the savings plans, employees defer receipt of that money until the date they withdraw their savings
balances. Under SEC rules, only the Restoration and Executive Savings plans are included in the following Table.
The
401(k) Savings Plan is a broad-based employee savings plan. Employees may contribute base salary and annual bonuses up to dollar limits established annually by the IRS. We match 100% of employee
contributions up to the first 4% of base salary and bonus the employee contributes. The Company matching contributions vest after two years of service (three years prior to December 1, 2010).
Employees may invest their contributions in a variety of funds, including a Company stock fund. Withdrawals from the 401(k) Savings Plan are permitted by applicable regulations.
The
Restoration Savings Plan is designed to replace savings opportunities from base salary and annual bonuses that are reduced or otherwise limited by IRS rules for the 401(k) Savings Plan. Employee
contributions to the Restoration Savings Plan begin after the employee has contributed the maximum possible amount permitted by the Code to the 401(k) Savings Plan. Beginning in 2012, we allow
eligible employees to save up to 50% of base salaries and up to 80% of bonuses in the Restoration Savings Plan. We did this to increase their ability to save for retirement and to allow executives
covered by the stock ownership guidelines a greater opportunity to invest in the Company stock fund. The Restoration Savings Plan has many features that mirror the 401(k) Savings Plan including
contribution
rates, Company matching contributions and vesting. Employees may invest their contributions into the same funds that are available in the 401(k) Savings Plan. However, no
actual monies are invested in these funds to avoid tax consequences that conflict with the pre-tax nature of this Plan, and, thus, these investments are referred to as "notional
investments." To the extent that the notional investment gains exceed employee contributions at the date of distribution, the Company pays the increase in value. The Restoration Savings Plan permits
distributions while employed and following termination of employment as a lump sum and as annual installment payments.
The
Executive Savings Plan is a pre-tax savings plan. Contributions from base salary and bonuses earn interest at a rate that is fixed annually and approximates 120% of 10-year
Treasury Note rates. The Plan permits distributions following termination of employment as lump sum or annual installment payments. The Plan does not currently permit additional contributions, other
than the 2010-2012 RSUs deferred under Mr. White's 2010 Performance Stock Unit Award Agreement, which were deferred upon certification of performance and approval of the Committee
in February 2013.
The
2012 Non-Qualified Deferred Compensation table and the discussion following provide information regarding each NEO's participation in the non-qualified savings plans. Other
than earnings in column (e), all contributions, other than Mr. White's RSU contribution, have also been reported in the 2012 Summary Compensation Table on page 54.
Mr. White's RSU award contribution is reported in the 2012 Option Exercises and Stock Vested Table on page 65 but only the value of the net share amount after tax withholding is shown in
this table.
69
Table of Contents
DIRECTV
2012 Non-Qualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Plan Name
(b)
|
|
Executive
Contributions
in Last FY
($)
(c)
|
|
Company-Matching
Contributions
in Last FY
($)
(d)
|
|
Aggregate
Earnings
in Last FY
($)
(e)
|
|
Aggregate
Withdrawals/
Distributions
($)
(f)
|
|
Aggregate
Balance at
Last FYE
($)
(g)
|
Michael White
|
|
Restoration Savings Plan
|
|
|
213,061
|
|
|
213,061
|
|
|
98,862
|
|
|
|
|
|
1,331,346
|
|
|
Executive Savings Plan
|
|
|
25,523,707
|
|
|
0
|
|
|
0
|
|
|
|
|
|
25,523,707
|
Patrick Doyle
|
|
Restoration Savings Plan
|
|
|
324,816
|
|
|
62,694
|
|
|
277,676
|
|
|
|
|
|
2,235,770
|
|
|
Executive Savings Plan
|
|
|
0
|
|
|
0
|
|
|
18,438
|
|
|
|
|
|
190,708
|
Bruce Churchill
|
|
Restoration Savings Plan
|
|
|
337,571
|
|
|
142,921
|
|
|
456,826
|
|
|
|
|
|
3,525,214
|
Larry Hunter
|
|
Restoration Savings Plan
|
|
|
230,193
|
|
|
81,200
|
|
|
416,313
|
|
|
|
|
|
3,676,616
|
|
|
Executive Savings Plan
|
|
|
0
|
|
|
0
|
|
|
57,853
|
|
|
|
|
|
1,578,463
|
Michael Palkovic
|
|
Restoration Savings Plan
|
|
|
311,110
|
|
|
61,338
|
|
|
210,055
|
|
|
|
|
|
1,812,685
|
|
|
Executive Savings Plan
|
|
|
0
|
|
|
0
|
|
|
18,097
|
|
|
|
|
|
187,147
|
Romulo Pontual
|
|
Restoration Savings Plan
|
|
|
62,678
|
|
|
58,201
|
|
|
144,254
|
|
|
|
|
|
1,132,145
|
|
|
Executive Savings Plan
|
|
|
0
|
|
|
0
|
|
|
19,275
|
|
|
|
|
|
199,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Contributionscolumn (c)
The
amounts shown in column (c) represent compensation that was earned in 2012 and that the NEOs elected to contribute to the Restoration or Executive Savings Plans. The amounts shown in
column (c) that came from 2012 base salary and the 2012 bonus paid in early 2013 are also included in the 2012 Summary Compensation Table, columns (c) and (f), respectively, on
page 54. Mr. White's contributions to the Executive Savings Plan from the 2010-2012 performance RSUs that vested in early 2013, are included in the 2012 Option Exercises and
Stock
Vested Table on page 65. Mr. White's RSU contributions (518,880 shares valued at $25,523,707) shown in this table are net of shares withheld for taxes.
Company Matching Contributionscolumn (d)
The
amounts shown in column (d) represent Company-matching contributions to the Restoration Plan. The amounts shown in column (d) that came from 2012 base salary and the 2012 bonus paid
in early 2013 are included in the amounts shown in the 2012 Summary Compensation Table, column (h) on page 54 and the Supplementary Chart 16, column (c) on page 56.
Mr. White's 2010-2012 RSU contribution was not eligible for and did not receive a matching contribution.
70
Table of Contents
Executive Compensation: Non-Qualified Deferred Compensation Plans
Earningscolumn (e)
The
amounts shown in column (e) include gains or losses on notional investments in the Restoration or Executive Savings Plans. The interest and earnings from notional investments in this column
are all at market rates and, therefore, are not included in the 2012 Summary Compensation Table, column (g) on page 54.
Withdrawals and Distributionscolumn (f)
There
were no withdrawals by or distributions to NEOs in 2012.
Year-End Balancescolumn (g)
The
amounts shown in column (g) represent the closing balance as of December 31, 2012 in each executive's Restoration or Executive Savings Plan account. The balances shown have been
adjusted to include the values of savings contributions from the 2012 bonuses and Mr. White's RSUs paid in early 2013. Except for earnings, the balances include amounts currently or previously
reported in the 2012 Summary Compensation Table on page 54 and the 2012 Option Exercises and Stock Vested Table on page 65.
71
Table of Contents
DIRECTV
|
Potential Payments upon Termination or Change in Control
|
Plans and Agreements with the NEOs
Mr. Palkovic
voluntarily terminated his previous employment agreement in February 2013 and the following discussion includes Mr. Palkovic under the Executive Severance Plan. We adopted a
CEO Severance Plan in 2012 and an Executive Severance Plan in 2012. The severance plans include restrictions not to compete with the Company and not to solicit employees to leave the Company. We
consider the value of these restrictions when determining the levels of post-employment compensation. There are no tax gross-ups.
We
intend to comply with Sections 162(m) and 409A of the Code, as each applies to compensation payable upon and following a termination of employment of each of the NEOs.
In
discussing these arrangements, the terms "Cause," "Disability" and "Effective Termination," have the following meanings.
-
-
"Cause" means (i) the executive is convicted of, or pleads guilty or nolo contendere, to a felony; (ii) the
executive engages in conduct that constitutes continued willful neglect or willful misconduct in carrying out duties, resulting in economic harm to or damage to the reputation of the Company; or
(iii) the executive breaches any material affirmative or negative covenant or undertaking, which breach is not substantially cured within 15 days after written notice. For
Mr. White, "Cause" also requires an affirmative vote of 75% of the entire Board.
-
-
"Change in Control" shall mean the occurrence of any of the following events: (1) a change in
ownership of DIRECTV
in which any one person, or more than one person acting in a group, acquires
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ownership
of stock of DIRECTV that, together with stock held by such person or group, constitutes greater than 50% of the total fair market
value or total voting power of the stock of DIRECTV; (2) a change in effective control of DIRECTV whereby any one person, or more than one person acting in a group, acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of DIRECTV possessing 30 percent or more of the total
voting power of the stock of DIRECTV, unless the members of the Board of Directors prior to the acquisition continue to constitute at least 75% of the members of the Board of Directors after such
acquisition; or (3) a change in ownership of a substantial portion of DIRECTV's assets, which occurs on the date any one person, or more than one person acting in a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets of DIRECTV that have a total gross fair market value greater than
50% of the total gross fair value of the assets of DIRECTV immediately before such acquisition.
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"Disability" means the inability to substantially perform the executive's duties and
responsibilities for a period of 120
consecutive days.
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"Effective Termination" means (i) a change in the executive's principal place of employment, (ii) any
adverse change in the scope of job responsibilities or reporting relationship, (iii) a reduction in pay, (iv) removal from eligibility for the plan, and (v) a termination of the
plan or a reduction in the participants' rights or benefits under the plan.
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Executive Compensation: Potential Payments
Change in Control"Double Triggers"
Generally,
we structure our plans and terms of equity awards with "double-triggers" in which both a completed change in control and a termination of employment are prerequisites for accelerated
vesting of equity awards.
The
agreements, arrangements or other compensation programs for the NEOs or other employees, upon entering into or completing a change in control of the Company, (i) do not provide additional
compensation to be paid, (ii) do not provide for accelerated vesting or payment of compensation, and (iii) do not provide tax gross-ups.
2010 Stock Plan
The Plan was approved by shareholders on June 3, 2010, and includes key provisions that provide the Compensation Committee flexibility to
assure that employees are treated appropriately in a transaction that results in a change of control and that their interests and the interests of the Company and its stockholders will be addressed
appropriately by the Compensation Committee.
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Upon a corporate transaction, including a change in control in which the Company is the surviving company, the 2010 Stock
Plan permits the Compensation Committee of the Board to proportionately adjust outstanding stock awards and provide for the assumption, substitution, exchange or other settlement of the awards.
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In the case of a change in control in which the Company is not the surviving company,
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and,
if the acquirer were to agree to assume or replace the outstanding stock awards, then the outstanding stock awards would continue and would
not be payable until the end of the applicable performance period or stock option term, or would be payable following a "double trigger" event (for example, an involuntary termination of employment
without cause by the acquiring company or an Effective Termination).
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Finally, in the case of a change in control in which the Company is not the surviving company, and if the acquirer
does
not agree to assume or replace the outstanding stock awards, the 2010 Stock Plan accelerates vesting and payment of the stock awards, unless the Committee determines otherwise, subject to Code
Sections 162(m) and 409A. This feature allows executives and managers to realize the benefits of the stock awards that may have been earned through the completion of the change in control and
that would otherwise be terminated by the acquiring company without compensation.
CEO Severance Plan
In this Plan, if the compensation and benefits would constitute "parachute payments" under Code Section 280G, then the plan would provide
either (i) the full amount or (ii) a lesser amount such that no portion is subject to Code Section 280G, whichever provides the higher after-tax amount, including the
potential taxes under Code Section 4999. The plan does not provide for any tax gross-up.
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DIRECTV
Supplementary Chart 17Summary of the Treatment of Compensation Upon Termination of
Employment (1)
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Summary of the Treatment of Compensation Upon Termination of Employment
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For Cause or
Voluntary
Resignation
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For Death, Disability,
or Retirement
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For Involuntary Termination
Without Cause or
For Effective Termination
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"Double Trigger"
During the 2 Years
Following a Change
in Control For
Involuntary Termination
Without Cause or
For Effective Termination
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Performance Bonus
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Cancelled
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Pro rata bonus
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Pro rata bonus
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Pro rata bonus
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Performance RSUs
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Cancelled
CEO: N/A
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Pro rata vesting, subject to Company performance
CEO: N/A
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Pro rata vesting, subject to Company performance
CEO: N/A
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Vest 100%
CEO: N/A
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Stock Options
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For Cause: Cancelled
For CEO Resignation: Cancel unvested options; vested options exercisable for full term
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Pro rata vesting; exercisable for 3 years
CEO: Pro rata vesting; exercisable for full term
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Pro rata vesting; exercisable for 1 year
CEO: Vest 100%; exercisable for 3 years
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Vest 100%, exercisable for 1 year
CEO: same vesting as involuntary termination; exercisable for full term
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Employee and Executive Benefits and Perquisites
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Per plan rules and practices
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Per plan rules and practices
For disability, continue medical benefits until the earlier of 12 months or the end of COBRA coverage
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Per plan rules and practices
Continue medical benefits until the earliest of 12 months or the end of COBRA coverage or other employment
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Same as involuntary termination
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Other Severance
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None
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None
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One times the sum of base salary and target bonus payable at termination
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Same as involuntary termination
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(1)
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Under
terms and conditions of the CEO and Executive Severance Plans:
Restrictions for non-compete and non-solicit
While employed and for one year after leaving the company (for the CEO, two years), the
executive will not compete with the Company or solicit employees to leave the Company. In consideration for complying with the post-employment restrictions following resignation,
retirement, involuntary termination without cause or for Effective Termination, following the end of the post-employment restriction period, the Company will provide a cash payment equal
to one year's base salary plus target bonus (as in effect at the time of termination). Eligibility for this payment may be cancelled at the time of retirement, upon notice. Upon failure to comply with
the post-employment restrictions, the cash amount will not be paid and unvested equity awards are subject to forfeiture and cancellation.
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Executive Compensation: Potential Payments