It is important to note that long-term incentives granted in March of 2017 are considered by
the MD&C Committee to be a pay opportunity with the realizable value fully dependent on Harscos future share price performance. For NEOs, long-term incentives consist of
one-third
SARs, Restricted
Stock Units (RSUs) and PSUs.
The Company granted performance share units in 2015 with vesting conditioned generally on
Harscos TSR performance relative to the S&P MidCap 400 Index for the
3-year
period from 2015 through 2017. Harscos TSR for the performance period was at the 24
th
percentile of the index, resulting in a payout of 0% of target.
|
|
|
2015 to 2017 PSU Award
|
|
Payout
Factor
|
Relative TSR versus S&P MidCap 400 Index
|
|
0% of Target
|
Discussion of Chief Executive Officer Pay
We believe our executive compensation program strikes an appropriate balance between our ability to attract, motivate, develop, and retain
highly qualified leaders and help to ensure our executives interests are parallel with the long-term interests of our stockholders. As such, the majority of executive compensation is structured utilizing equity compensation, aligning the
realized value of these awards with stockholders interests.
Pay Opportunity versus Realized Pay and Potential Realizable Pay
On an annual basis, the MD&C Committee approves a targeted pay opportunity by establishing the target AIP level and the grant value of
long-term incentive awards for the year. However, the potential real value of these awards is highly dependent on: (1) Harscos operating performance, as defined by BUC, for the cash AIP award; (2) Harscos share price and
relative TSR performance for the long-term incentive compensation; and (3) satisfaction of the service obligation in the long-term incentives vesting schedules.
Realized Pay
As a large majority of pay
opportunity represents potential pay that could be realized in future years, we also review the CEOs realized pay for each full year. In short, realized pay is comprised of actual pay earned including base salary and AIP payouts plus the value
of vested/exercised equity awards during the period. While Mr. Grasbergers pay opportunity is established to be competitive with median market levels, his realized pay varies based on Harscos stock price performance, equity vesting
and incentive payouts.
Potential Realizable Pay
In addition to pay opportunity and realized pay, a third perspective the Committee considers is potential realizable pay. Potential realizable
pay considers base salary and AIP payouts plus a snapshot of the intrinsic value of equity within the period. The intrinsic value of equity uses the December 29, 2017 share price to calculate a snapshot value for awards
granted within the period. It combines RSUs, in the money value of SARs, and an estimate of the value of unvested PSUs based on the relative total stockholder return performance to date.
Realized and Potential Realizable Pay as a Percent of Pay Opportunity
Mr. Grasbergers
realized pay
for 2015 to 2017 was 49% of the pay opportunity granted over the same time period due to a
combination of mixed results of actual AIP payouts, no PSUs earned, no SARs exercised and standard RSUs vesting. However, Mr. Grasbergers potential realizable pay is 157% of the pay opportunity granted for the 2015 to 2017 period,
primarily due to the Companys strong TSR performance since 2016 that is driving an increase in the intrinsic value of equity awards above the value on the date of grant.
It is important to note that the intrinsic value of equity awards is based on share price and relative TSR performance of unvested awards for
incomplete performance cycles and will change each year. The actual realized value will continue to be determined by the future share price (and, for PSUs, TSR) performance of the Company through the vesting periods.
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