EXHIBIT (10-10)
Summary of the Company’s Short
Term Achievement Reward Program and related correspondence and
terms and conditions.
SHORT TERM ACHIEVEMENT REWARD
PROGRAM
The Short Term Achievement Reward
(“STAR”) Program is The Procter & Gamble
Company’s (the “Company”) annual bonus program
designed to motivate and reward employees for achieving outstanding
short term business results for the Company and its subsidiaries.
STAR awards are made pursuant to authority delegated to the
Compensation & Leadership Development Committee (the
“C&LD Committee”) by the Board of Directors for
awarding compensation to the Company’s principal officers and
for making awards under the Procter & Gamble 2001 Stock
and Incentive Compensation Plan (the “2001 Plan”)
and/or the 2004 Gillette Long Term Incentive Plan (the
“Gillette Plan”) or any successor stock plan(s)
approved in accordance with applicable listing
standards.
Employees at Band 3 or above and who
worked at least 28 days (four calendar weeks) during the applicable
fiscal year are eligible to participate. Eligible employees who do
not work a full schedule (e.g., leaves of absence, disability, and
less-than-full time schedules) in the fiscal year in which the
award is payable may have awards pro-rated.
The individual STAR Award is
calculated as follows:
(STAR Target) x (Business Unit
Performance Factor) x (Total Company Performance
Factor)
|
•
|
|
The STAR Target for each
participant is calculated as:
|
(Base Salary) x (STAR Target
percent)
Base Salary
at the end of the applicable fiscal
year is used to calculate the STAR award.
Generally, the STAR Target
Percent is dependent on the individual’s position and
level (Band) in the organization. The STAR Target percent for
participants at Band 7 or above is set by the C&LD Committee.
The STAR Target percent for all other participants is set by the
Chief Executive Officer, with the concurrence of the Global Human
Resources Officer, pursuant to authority delegated to them by the
C&LD Committee. If an individual’s position and/or level
changes during a fiscal year, and that change results in a new STAR
Target Percent, the STAR Target Percent is pro-rated according to
the amount of time in each position/level during the fiscal
year.
|
•
|
|
The Business Unit Performance
Factor is based on the fiscal year success for the appropriate
STAR business unit. The STAR business units are defined by the
Global Human Resources Officer and may consist of business
categories, segments, geographies, functions, organizations or a
combination of one or more of these items. The STAR business units
will be defined within ninety (90) days of the beginning of
the fiscal year, but may be adjusted as necessary to reflect
business and/or organizational changes (e.g., reorganization,
acquisition, merger, divestiture, etc.). The Business Unit
Performance Factors can range from 53% to 167% with a target of
100%. In general, a committee consisting of at least two of the
Chairman of the Board, Chief Executive Officer, Chief Financial
Officer, Global Human Resources Officer and/or the Chief Operating
Officer (the “STAR Committee”), conducts a
comprehensive retrospective assessment of the fiscal year
performance of each STAR business unit against previously
established goals for one or more of the following measures:
Operating Total Shareholder Return, Key Competitor Comparison,
After Tax Profit, Operating Cash Flow, Value Share, Volume, Net
Outside Sales, Value Contribution, Organization Head Self
Assessment, and Cross Organization Assessment. The STAR Committee
makes a recommendation of an appropriate Business Unit Performance
Factor to the C&LD Committee. There may also be other factors
significantly affecting STAR business unit results positively or
negatively which can be considered by the STAR Committee when
making its recommendation. No member of the STAR Committee makes
any recommendation or determination as to their own STAR award. As
a result, there are certain instances in which a Business Unit
Performance Factor recommendation to the C&LD Committee must be
made exclusively by the Chief Executive Officer.
|
|
•
|
|
The Total Company Performance
Factor is based on the total Company’s success during the
fiscal year and ranges from 80% to 130%, with a target of 100%. The
same Total Company Performance Factor is applied to all STAR award
calculations, regardless of STAR business unit. It is determined
using a matrix which measures results against pre-established goals
for fiscal year organic sales growth and core earnings per share
(“EPS”) growth for the fiscal year.
|
While the STAR Committee makes
recommendations to the C&LD Committee regarding the Business
Unit and Total Company performance factors to be applied to all
STAR awards (except those for the STAR Committee members), only the
final award amounts for principal officers are approved
specifically by the C&LD Committee. The C&LD Committee has
delegated the approval of STAR awards for other participants to the
Chief Executive Officer. The C&LD Committee has discretion to
use, increase or decrease the performance factors recommended by
the STAR Committee and/or to choose not to pay STAR awards during a
given year.
Each year the C&LD Committee
approves a cash pool for STAR awards equal to a percentage of
profit, and the C&LD Committee sets a limit on the portion of
that pool which can be awarded to each of the Named Executives
subject to Section 162(m) of the Internal Revenue Service
code. This ensures that any STAR awards paid to such executives are
fully tax deductible by the Company.
STAR awards are determined after the
close of the fiscal year and are paid on or about
September 15. The award form choices and relevant
considerations are explained in payment preference materials
generally in the form of Appendix 1 . Participants receive
written notice of their award detailing the calculation, generally
in the form of Appendix 2 . The grant letters used for those
employees who elect to receive awards in stock options or
restricted stock units are generally in the form of Appendix
3 .
Generally, STAR awards are paid in
cash. However, before the end of the calendar year preceding the
award date, eligible participants can elect to receive their STAR
award in forms other than cash. Alternatives to cash include stock
options, local deferral programs (depending on local
regul