We make judgments based on the considerations listed above and on competitive compensation at companies
of similar size and in similar fields. We use specific peer comparisons listed above and we draw on our knowledge of the market cost of any executive who might have to be replaced. The Compensation Committee also periodically reviews various publicly available sources of compensation data. We believe that our executive compensation is generally lower than executive compensation paid by companies of similar size and in similar fields for comparable positions. There is a need to close this gap through base salary increases and performance-based incentive plans in order to retain and attract qualified management talent. Stockholders are being asked to approve our 2012 Long- Term Incentive Plan and the Board intends to make grants pursuant to this plan in fiscal year 2013.
Components of Executive Compensation The five elements of our executive compensation program are:
Base salary Cash incentive compensation Long-term incentives Post retirement benefits Other compensation
These components are intended to encourage and achieve the purpose and philosophies of our
compensation programs set forth above. We seek a mix between all elements of compensation to achieve a total compensation package that is commensurate with the executive officer’s position, responsibility and performance relative to his peers in other companies of similar size and in similar fields.
Base Salary Base salary is the fixed component of the executive’s cash compensation and should reflect the individual’s
position and scope of responsibility, taking into consideration experience, tenure, long-term potential and the ability to assume additional responsibility.
The Compensation Committee reviews base salaries for the executive officers in June of each year or in
connection with promotions. In light of the severe recession in the spring of 2009, all executive officers were subject to a 10% salary reduction effective March of 2009; however business conditions and financial performance improved starting in February 2010. As a result, our operating units returned to full work weeks and wage and salary cuts for monthly paid personnel were restored. In June 2010, the Compensation Committee voted to restore executive base salaries to fiscal 2009 levels effective July 1, 2010, resulting in base salaries for fiscal 2011 of $325,000 for Mr. Starrett, $215,000 for Mr. Walsh and $150,000 for Mr. Aspin. Mr. O’Brien joined the Company in November of 2009 at an annual base salary of $175,000, which remained in effect through fiscal 2011. The Compensation Committee of the Board of Directors approved the following officer salaries effective July 1, 2011 based on our executive compensation philosophy: Mr. Starrett $375,000; Mr. Walsh $250,000; Mr. O’Brien $200,000; and Mr. Aspin $175,000. The Compensation Committee of the Board of Directors approved the following officer salaries effective July 1, 2012 based on our executive compensation philosophy: Mr. Starrett $394,000; Mr. Walsh $263,000; Mr. O’Brien $213,000; and Mr. Aspin $185,000.
Cash Incentive Compensation Annual cash incentive compensation is variable pay for the executive officers to reward them for overall
Company and individual performance in the key areas of sales, operational, and financial results. This component of incentive compensation is important to attract highly motivated and skilled executives.
The Board of Directors, upon the recommendation of the Compensation Committee, voted in fiscal 2008 to
adopt a cash bonus plan for executive officers of the Company (the “Cash Bonus Plan”). The Cash Bonus Plan became effective for fiscal 2008. The Cash Bonus Plan bases awards on income before tax (IBT) as a percentage of net sales from consolidated results of operations. The Cash Bonus Plan covers the three executive officers responsible for the Company’s worldwide results: Douglas A. Starrett, Stephen F. Walsh, and Francis J. O’Brien. The Board of Directors administers the Cash Bonus Plan.
13 A10
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