AD-At21 644 STUDY OF CONTEACTOSR immIRAt R1M S TICTtME1S(U) CAC 1NCPBDEIAL ASRLINS1TWI wA 0 1 SPECTR 1UDE OfS

P23G.Si 3-C-agog

UNCLASSIFPIED ?/a S/I hL

Ehoiiimno iimEllII E EEI7END831

LIN 23.2

1.2 113 m1

MICROCOPY RESOLUTION TEST CHART

NATIONAL eUREAU OF STANDARDS - 1n5 -3

SECURITY CLASSIFICATION OF THIS PAGE (When Data Entered)l

REPOR DOCMENTTIONPAGEREAD INSTRUCTIONSREOTDCMNT•INPG BEFORE COMPLETING FORM

I. REPORT NUMBER 2. GOVT ACCESSION N . RECIPIENT'S CATALOG NUMBER .

4. TITLE (and Subtitie) f 5. TYPE OF REPORT & PERIOD COVERED

Study of Contractor Internal Reward Structures Final, 1981

6. PERFORMING ORG. REPORT NUMBER

7. AUTHOR(s) 9. CONTRACT OR GRANT NUMBER(s)

Bertram 1. Spector F33600-81-C-0603

9. PERFORMING ORGANIZATION NAME AND ADDRESS 10. PROGRAM ELEMENT. PROJECT. TASKAREA & WORK UNIT NUMBERS

CACI, Inc.-Federal1815 North Fort Myer DriveArlington VA 22209

II. CONTROLLING OFFICE NAME AND ADDRESS 12. REPORT DATE

Air Force Business Research Mgt Ctr if Dec 81(AFBRMC/RDCB) t3. NUMBER OF PAGES

ight-Patterson AFB OH 45433 33.'ONITORING AGFNCY NAME & ADDRESS(if different from Contrciting Office) 15. SECURITY CLASS. (of this report)

IUnclassified

DS. OECLASSIFICATION DOWNGRADINGSC EOULE

, ISTRIBUTION STATEMENT (of this Report)limited Distribution--Approved for Public Release D TIC

?W ELECTENOV 1 8 SW

STRIBUTION STATEMENT (of the abstract entered in Block 20, it different from Report)

imited Distribution--Approved for Public Release B

IPPLEMENTARY NOTES

d -.

19. KEY WORDS (Continue on reveree aide if necessary and identify by block number)

Contractor Evaluation StrategyMotivationIncentive SystemsNegotiations

20 AITACT (Continue an reverse stde If nece.a y ad identify by block number) +,'... "

_ he overall objective of this study was to provide US Air Force acquisitionSofficers and program managers a greater understanding of internal contractor

motivation as it impacts contract negotiations with the Air Force. BylU understanding the goals, satisfactions, and motivations of managers in the-- contractor divisions, subsidiaries, and operating units, Air Force personnel

L. have the basic information to anticipate likely contractor positions and(CONTINUED ON REVERSE)

*D , r OR3 1473 EDITION OF I OVGSS OBSOL TE UNCLASSIFIED* *+. 8 2 1 1 1 gI:'CURI I"-IICTION OF THIS PAGE r(Whfen Data Entered)

'i.2 11 ~ 1,,; To zI:'

IINCI ASSIFTEDSECURITY CLASSIFICATION OF THIS PAGE(Men Dae. Enf.,.d)

20.- actions in negotiations. They can test and plan alternate Air Forcecontracting strategies that maximize the goals of the contractor whileleveraging contract terms to the Air Force's advantage.

The study identified internal methods used by the corporate management oftop Air Force contractors to influence, motivate, and leverage the behaviorand performance of managers in their division~s, subsidiaries, and operatingunits. A summary matrix of their present incentive plans is provided.

Accession For

NTIS GRA&I'DTIC TAB11-announced 0J zt Lf leaion

-Distribution/Avilability lCodesH Avail and/or

Dibt Special

/C.

UNCLASSIFIED ~ ~SECURITY CLASSIPICATIOft OF PAGErwh.n Dat. En..,.E)

4 .

C.A.C.I.WASHINGTON, D.C. OFFICES

STUDY OFCONTRACTOR INTERNAL REWARD STRUCTURES

Final Study Reportand

Incentive/Contractor Summary Matrix

Contract No. F33600-81-C-0603

Submitted by:

Managemeut Decisions DepartmentCACI, Inc.-Federal

1815 North Fort Myer DriveArlington, Virginia 22209Telephone: (703) 841-7800

Submitted to:

AFBRMC/RDCBRoom 2063, Building 125, Area IWright-Patterson Ahf, Ohio 45433

December 15, 1981

The views and conclusions contained in this document are those of the

authors and should not be interpreted as necessarily representing theofficial policies either expressed or implied, of the U.S. Air Force orthe U.S. Goverment.

CACI. INC.-IEDURAL: 1815 NORTH FORT MYIR DRI VI. ARUNGTON. VIRGINIA 22205. TELEHONE M 1K5)841.7505

.,.. ... ... . n at. - . 0 *,... .. .. ~ '*

TABLU OF CONTENTS

Page

EMMCUTIVE SUflO&RY. ...... .......... .... ...... #... 1

PURPOSE OF THIS REPORT.................................. 5

SUGARY TRENDS..o... ............................... 6

PRACTICAL UTILIZATION OF THE DATA .. ..................... ...... 10

NEXT STEPS*.**........ o... .. oo ..................... o.... 20

C CONTRACTORIINCENTIVE SUMO4ARY ....... .................... ..... 22-

U l

CEXECUTIVE SUMMARY

Background

In J ly 1981, CACI, Inc. submitted an unsolicited proposal to the Air

Force Business Research Management Center (AFBRC) to analyze how

motivational programs within large defense contractor organizations

affect the actions of managers and executives who negotiate contracts

with the Air Force. The principal objective of this research was to

assess whether knowledge of these contractor motivational programs by

Government acquisition and program offices would provide them with

additional leverage in tailoring contract terms to maximize Air Force

acquisition objectives.

Research Need

Earlier, the Joint Logistics Commander Group requested that Head-

quarters, Air Force Logistics Command (AFLC) enhance aspects of the

acquisition process by conducting research into contractor motivation.

AFLC submitted a research need to AFUMNC and a contract was awarded to

CACI, Inc. to begin work on August 14, 1981 to collect data on

contractor internal motivation system in specified defense

corporations.

Study Focus

The data collected on each company focus on the corporate objectives set

down in executive and management incentive plans. These plans motivate

key personnel to act and achieve corporate goals by promising signifi-

cant bonuses, recognition, promotions, company stock or other coupensa-

tion. An assessment of these key corporate goals by Air Force

acquisition and program offices can point to probable actions that

1

contractor management will take and can help the Air Force plan better

acquisition strategies to achieve their objectives through contracting.

Research Steps

The following approach has been taken:

1. Fifty large defense corporations that do business with HQUSAF and AJLC were identified.

2. Key factors about their internal motivational program were

defined to guide data collection.

3. A thorough examination of data sources was conducted.

4. Specific data were collected on each of the contractororganizations.

5. Detailed and sonimry versions of the data on executiveincentive programs and corporate objectives for each companywere submitted as deliverables.

(I . Conclusions

1. Most companies grant awards of company stock and options on the

basis of length of tenure, position in the corporate hierarchy, and

contribution to annual net earnings per share. While these types of

incentive plans are meant to build lonS-term equity for corporate

managers, they motivate actions that maxinize short-term profits.

2. Most companies also award annual bonuses based on growth in net

earnings or return on equity, which again yield short-term management

efforts to axiase fee, reduce costs, and iprove cash flow.

3. Many companies are beginning to experiment with incentive plans

focused on achieving long-term corporate objectives, such as long-term

growth in earnings, achievement of cash flow objectives, return on

invested capital, and multi-year strategic performance targets

2

. -i n I" -

__ _ _ _ _.i.

established for divisions or operating units. These types of incentives

are likely to produce management actions to tradeoff short-term profit

for guarantees of future business and multi-year contracts, obtain

government funded capital investments, make larger corporate

Investments, and diversify Into the commercial sector.

Next Step.

How can this Information on contractor motivation be integrated best

into the routine planning process of acquisition offices to help

anticipate likely contractor actions and tailor contracts to achieve Air

Force acquisition goals?

A practical planning tool can be developed for use by acquisition and

program officers that would:

* Retrieve specific up-to-date Information on eachcompany, and

* Enable officers to test, simulate and ask "whatIf" questions about the impact of contractormotivation on contractor actions on a company-

specific basis. The tool can also provide theability to ask "what if" questions that assess theImpact of alternate contract terms on maxiuzingAir Force goals while satisfying contractorobjectives.

This planning tool would require development of a model of the

acquisition planning process that could provide feedback on the likely

benefits of pursuing alternate contracting strategies in different types

of procurements.

The model could be engineered so that new users can operate it without

prior training. The results of the model can be designed to provide

highly practical assistance In evaluating acquisition strategies. The

tool would also be very useful for training new acquisition and program

officers.

3

i . . .. ... . ."'

C OBJECTIVES OF THE STUDY

The overall objective of this study is to assist U.S. Air Force

acquisition officers and program managers gain greater understanding of

internal contractor motivation as it impacts on contract negotiations

with the Air Force.

By understanding the goals, satisfactions, and motivations of managers

in the contractors' divisions, subsidiaries and operating units, Air

Force personnel have the basic information to anticipate likely

contractor positions and actions in negotiations. They can also test

and plan alternate Air Force contracting strategies that maximize the

goals of the contractor while leveraging contract term to the advantage

of the Air Force.

(. More specifically, the project Is focused on identifying the particular

techniques by which corporate management in the top Air Force

contractors attempt to influence, motivate and leverage the behavior and

performance of managers in their divisions, subsidiaries and operating

units. These methods include formal incentive and reward programs, the

establishment of strategic business goals against which divisional

management will be evaluated, and the management climate and culture

within which managers must operate.

4

C PURPOSE OF THIS REPORT

This Final Study Report presents the results of the data collected

internal contractor incentive/reward programs. Among the areas

discussed are:

* Summary trends.

i Practical utilization of the data.

" Data sources.

" Data updating.

" Next steps.

A summary matrix of current incentive plans at each of the top Air Force

contractors in the study is also presented.

Previous technical reports have focused in detail on the data collection

plan (dated September 30, 1981) and the actual data collected In their

fully expanded form (dated November 20, 1981).

I .

ILf5

'4

C SUMMARY TRENDS

DATA AVAILABILITY

Complete and current data on executive incentive programs were available

on 45 of the 50 defense contractors included in the study sample. Data

were not available through public sources or direct request from

Aerospace Corporation, Hughes Aircraft Company, Mitre Corporation,

Sargent Fletcher Company, and Sverdrup Corporation. Current data on

strategic business goals and management climate were found on 29 of the

50 companies.

TYPES OF INCENTIVE PLANS

Of the 45 companies on which data were available,

C-e 40 have active Bonus Plans, primarily annual cash

bonus plans,

o 37 have active Market-Based Equity Building Plans,primarily annual stock options plans, and

o 16 have active Performance-Based Equity BuildingPlans, primarily long-term performance unit plans.

The annual cash bonus and stock option plans typically set yearly

targets that motivate short-term, tactical management efforts toward

maxinising profit, reducing costs, and Improving cash flow. The long-

ter performance unit plans, on the other hand, typically set 3 to 5

year strategic targets and award performance units to managers as they

make progress toward achieving these objectives. Only at the end of the

award period and with successful achievement of the targets can the

units be cashed in. These plans motivate more strategic management

actions where tradoffs against short-term profit are more likely.

6

.7... _ __"-.. __ -e"'

( GOALS MANAGERS ARE SHOOTING FOR IN INCENTIVE PLANS

Different targets are established for each category of incentive plan.

Knowledge of these targets can help in anticipating contractor actions.

Sonus Plan

" Taigeted % growth in net earnings

" Earnings must exceed a set Z of capital orshareholder equity

* Achievement of pre-set corporate, division orindividual targets (volume growth, profit goals,technical achievements, return on assets, returnon equity, cash flow, new contracts, new products)

" Management formula keyed to individualperformance, position in company, length ofservice, contribution to profit and supervisoryappraisal.

Long-Term Performance Unit Plans

o 3 to 5 year targets set for earnings per sharegrowth rates, return on assets, return on capitalor other financial or strategic goals.

Stock Options Plans

* Management formula keyed to upper managementa positions, and contribution to corporate financial

goals.

'.1

7

S. .. . . .

OTHER STRATEGIC GOALS MANAGERS ARE SHOOTING FOR

COther publicly-stated corporate objectives were collected. These goals

are presented below in rank order based on the number of companies in

the sample that have espoused them.

Strategic Goals Number of Companies

Make higher profits and margins 11

Tighten financial controls 8

Pursue acquisitions and diversity 7

Increase research and capital spending 5

Reduce dependence on government contracts 4

Be the low cost producer 3

Become the technical innovator in the field 3

Dominate the market 3

Reduce corporate investments 2

Strengthen the cash flow 2

( Pursue long-term goals over short-term rewards 2

Pursue short-term earnings I

Seek new commercial spinoff products 1

Stress company service and reliability 1

MANAGEMENT CLIMATE WHICH MANAGERS MST CONFORM TO

Every corporation has a climate, culture or philosophy which managers

must conform to or risk dismaissal. Management climate also reflects the

current "state of the organization" in terms of morale, internal

disruptions, reorganizations, and so forth. An understanding of

management climate can help in anticipating the potential directions of

managerial actions.

8

-N. -lmlm la mn - . -81 --ld --n/ i m n

Categories of management climates are identified below in rank order

C' based on the number of companies in the study sample that have them.

Management Climate Number of Companies

High management turnover 8

Centralized decision-making in corporate headquarters 4

Decentralized decision-making in units 2

Strategic direction lacking 2

Risk-averse, conservative style 2

High respect for corporate hierarchy, loyalty and philosophy 2

Conclusions

The incentive, goal, and climate data collected on each of the large Air

Force contractors offers a unique advantage to Air Force acquisition and

program offices. They provide key information for anticipating

potential contractor actions and can help in testing, planning and

evaluating the impact of alternate contracting strategies that the Air

Force might pursue vis a vis these contractors.

4 9

C PRACTICAL UTILIZATION OF THE DATA

How can this data be used to assist Air Force acquisition officers and

program managers motivate contractors to maximize Air Force acquisition

objectives? The principal applications of this information are in

planning for .negotiations with contractors and in training of new

acquisition officers and program managers.

ANTICIPATION OF CONTRACTOR ACTIONS

Internal incentive programs attempt to motivate divisional management

toward achieving corporate objectives. If these objectives are

identified by analyzing the data gathered in this project, it might be

possible to anticipate likely contractor actions that would further

achievement of these goals.(For instance, if a contractor seeks program continuity they night be

willing to compromise on fee. A contractor seeking to tighten cash flow

might push for upfront payments and short-term progress payments. A

contractor seeking new product offshoots for the comercial market night

be willing to take greater risk in a government R&D type contract and

fund it partially through internal dollars while planning to gain a

large return on investment later in the cowe rcial sector.

Depending upon the goals managers are shooting for, their actions in

contracting situations are likely to produce concessions, demands,

compromises, and tradeoffs. For example, changes in corporate goals and

philosophy could potentially result in changes to:

o Risk-taking propensity.

* The importance of profit versus patriotism and thenational security.

10

( e The desired six of military and commercial

business,

e Contract types desired.

e The desired timing of contract awards.

TESTING AND EVALUATING ALTERNATE GOVERIENT STRATEGIES

Data gathered on executive incentives and corporate goals can also help

acquisition officers test and evaluate alternate government contracting

strategies vis-a-vis particular contractors by anticipating their

probable responses. For instance, if the government offers longer term

funded contracts, that would probably be seen as a very favorable

provision to a company whose objective is to build, expand and retain

the te:hnical capability of its staff. Such a company might be willing

to tradeoff the guarantee of program continuity for fee. The "what if"

tool described in the next section would facilitate this type of testing

and planning.C.

it

IC I

C DATA SOURCES

SECURITIES AND EXCHANGE COHMISSION FILINGS

Host U.S. public companies with more than 500 shareholders and more than

$1/2 million in assets are required to file certain documents with the

Securities and Exchange Commission (SEC) that contain information on

their executive compensation and incentive plans. Among those documents

that are most useful in identifying details of these plans are:

* Proxy Statements

a 10K Reports and their Exhibits

• Annual Reports to Shareholders

e Registration Statements (S-8 and S-1)

(These documents are available through the SEC directly or Disclosure,

Inc. on microfiche or hard copy (current year only). Data are usually

available on the incentive plan description, eligibility and

participation criteria, performance criteria, reward type, bonus pool

formula, and expiration date of the plan. In some cases, the amounts

awarded annually through the plans are available - primarily in the

Proxy Statements and 1OKs.

Most subsidiaries, divisions, or operating units are not required to

file with SEC separately from their parent company. A list of companies

required to file in available from the SEC. But in almost all

instances, executive incentive programs are established corporate-wide

and include upper middle management and top management of all corporate

units that contribute to the consolidated Income statement.

12

.-

Financial performance data for 3 to 10 years are also available on an

industry segment basis in the lO and Annual Shareholders Report. These

segmunts are usually aggregates of several divisions or operating units

that are all in the same line of business.

In some cases, corporations provide exhibits of the entire incentive

plan verbatim, sumaries of the plan, guidelines for managers on

performance criteria, forma that are used in administering the plan, and

payout statistics to officers, directors, and other employees.

In most cases, only the most recent documents filed with the SEC need be

referenced since the executive incentive program is stimarized for the

benefit of shareholders each year. However, in many cases, it was

necessary to trace back to an earlier year's filings to obtain expanded

descriptions or particular aspects of the plan.

t

QUESTIONNAIRES

Letters with response forms were mailed to all 30 corporations included

in the study requesting detailed information on their current executive

incentive plans. A sample letter and response form is presented in

Figure 1. The major purpose of this letter was to fill in gaps

concerning performance criteria for awards and provide data on

privately-held companies or those not required to file with the SEC.

Through December 4, 1981, six responses were received from the following

corporations:

a General Dynamics Corporation

9 Rockwell International Corporation

e Westinghouse Electric Corporation

* Textron Inc.

13

Figure I

C.A.C.I.WASHINGTON. D.C. OFFICES

date

address

Dear

CACI, Inc., an International R&D firm, is conducting a survey ofexecutive incentive and stock option programs in use by the topindustrial corporations. I would greatly appreciate your assistance inhelping gather data on your firm.

Specifically, we would like a description of your programs and the awardcriteria that mast be achieved or surpassed to be granted a bonus orstock option - the objectives executives are shooting for, corporateperformance goals, or the appraisal guidelines used to determineindividual awards.

While we have already gathered some data on your firm's incentiveprograms as reported in SEC filings, inforsation on the award criteriawas not readily available in those documents.

For your convenience, I have enclosed a form that requests the desiredinformtion. Thank you for your consideration.

Cordially,

Bertram 1. Spector, Ph.D.Vice President and ManagerManagement Decisions Department

BIS/ban

Enclosure

144

CACL INC.-PEMERAL: 1eas NORTH FOST MWSIU DeIVI. ARLINGTON, VIRGINIA 229,. TULEPNONE (703841-7300a 41 * 9tl'e e Aw1 n*twwm 1. * W t@UW V% O- /' . I^ * 1 *V • U40I90I09-s * I *l

C. SURVEY OF EXECUTIVE INCENTI PROGRAMS

1. Your company

2. Place a check next to each executive incentive program your companycurrently has in force.

a. Bonus plan f. Stock options-. Perfor- ance unit plan __. Stock purchasesc. Performance shares plan h. Stock appreciation rightsd. Purchase/appreciation grants _i. Stock grants (restrictede. Nill-value grants stock)

-J. Other:

3. For each of the programs you indicate above, please provide thefollo ng information.

A. Plan type:

Reward:

Eligible Personnel:

Award criteria (objectives or standards):

S. Plan type:

Reward:

ligible Personnel:

Award criteria (objectives or standards):

(over please)

15

2 771

C. la type__

Iligible Personnel:

Award criteria (ob'Jectiwes ot srtandards)

4. Your nne sad title

Thank you for your assistance. Please return this ftor to: Dr. leitram

1. Spector, CU C, Inc., 1815 North Port Nyer Drive, Azlilgton, Virginia

22209.

1 'I

- ~ -.... ~ " _ _ _ _ -.- . . . ~ -- -r--- -, -.

* Texas Instruments Inc.

* Thiokol Corporation

All but Rockwell provided additional useful information.

OPEN SOURCE LITERATURE

An extensive search of business journals published over the last five

years was conducted for the 50 companies included in the study.

Articles were analyzed to identify current corporate/subsidiary/

divisional strategic goals and objectives that would likely motivate

executives and managers in each company. Indications of the current

management climate - for example, managerial morale, degree of

managerial autonomy, the corporate financial situation, risk-taking

versus conservative management style, and conflicts within the top

management group -- were also identified as additional motivators of

divisional management.

The five journals that proved most useful in gathering this type of data

were:

• Business Week

9 Forbes

e Fortune

* Industry Week

• Financial World

Relevant and current data could not be found on all companies in the

study sample since the corporate coverage of these journals tends to be

uneven.

16A16

it

" .-....- . . .

ORGANIZATION CHARTS

Current organization charts of the corporations in the study and their

principal divisions and subsidiaries were available from the Defense

Industry Organization Service. Subscriptions to this service areavailable from Carroll Publishing Company. Washington, D.C.

17

---------------------------------------------r-

C DATA UPDATING

SEC FILINGS

Executive incentive programs usually expire after several years or reach

an award ceiling and then must be renewed and revised. This usually

requires a shareholder vote and thereby is reported in the proxy

statement. Stock option plans often have a maximum number of shares to

grant which may be totally distributed before the expiration date of the

plan. Therefore, it is important to monitor the SEC filings every year

to identify the active plans and the current goals managers are shooting

for.

The 10K and Annual Report to Shareholders are filed after the close of

the company's fiscal year. The Proxy Statement is distributed several

( . months before the annual shareholder's meting. Registration statements

are published to register securities before they are offered to

investors or employees under incentive plans.

QUESTIONNAIRES

Mailings of additional questionnaires are not likely to yield

significant amounts of information unless new companies are added to th.

list.

OPEN SOURCE LITERATURE

The five journals indicated earlier should be monitored on a regular

basis to gather new inaight into corporate strategic objectives and

management climate that might influence the performance ed behavior of

divisional management.

i 18 '

ORGAMIATION CHARTS

The service mentioned earlier updates corporate organization charts on aregular basnis over the year as changes occur.

19

7'7, __ __

C NEXT STEPS

How can this information on contractor motivation be integrated best

into the routine planning process of acquisition offices to help

anticipate likely contractor actions and tailor contracts to achieve Air

Force acquisition goals?

One way to institutionalize the use of this information is to develop

and implement a practical planning tool that would:

a Retrieve specific up-to-date information on theincentive plans, corporate objectives, managementclimate, and financial performance of eachcompany, and

e Enable officers to test, simulate, and ask "whatif" questions about the impact of differentincentive plans on contractor actions on a

(. company-specific basis. The tool can also providethe capacity to ask "what if" questions thatassess the impact of alternate contract terms onmaximizing Air Force goals while satisfyingcontractor objectives.

This planning tool would require the design and development of a

sophisticated model of the acquisition planning process that could

provide feedback on the likely benefits and costs of pursuing alternate

contracting strategies in different types of procurements.

The model could be engineered so that new users can operate it without

prior training. To facilitate processing, it would be wise to implement

the model on a computer, where it could be developed in a "user

friendly" interactive fashion. The results of the model can be designed

to provide highly practical assistance in evaluating alternate acquisl-

tion strategies. In addition to serving the planning function, this

20

I l. . . ..

tool would also be very useful for training new acquisition and program

officers by allowing them to test alternate strategies, getting feedback

and comparing their results to a baseline database of experienced

acquisition officers.

(2

21[

coMTRAroR/INcENTIVE SUMNAIT N&TRIX

I.m

S IS IS~UIW PLASS uQili' mIwLDI FIAI MITI WILKI PLANS Mims UAAWEIWCNRCNType Criteria tyeCriteeria Trpe Criteria - MSCLIATE

Aseerepc. Cceareacion Onoot. eavelahi.o

Ae. Coporation Annual Dinecrs- Esaoa not U -se& Orts. plan Haagtleasity Some. @=a a parceat formals

.1 capital

leats. Corporation Anual lamue Gouch ton mt au-Tar- S-twar Bps Stack Options "amosaso Major blip On clearearoiege and meega-, performnce grouth rate etch S caals and teckalew strategicmet appeal waits Plae objectives martioead acquiattlieea direction

beelog Comanya Anal hoes Wesatmont: cornisole- Law Cost predeter Lae corpoaeIncluding iedividual'e in corcial lets Investment ctii.

ip.~ efficiency. corcial eccaral.in. loyalty.lengch at ervice adceacnihetia t cccess

Cremolia, Aerican Discretionary Not available Steck loans %oaaiq per Steck option rlea Haegawa ~ akcit ea YAW to replace ald-Crporestes lnas visa ekers greeth taae finacial pig tter so-aoesta wick

managers

Drace, glacnic Coepasy -- Long-TOMw laculege bteck option plea ieGmeatperformne per "kare formals

mores Scrch of

5 years

I-Syecs let. hmal looms ibam at formals - - ntcted Stea noeesmatoption Plea tarmalei

Fairchild ladvaecria. fae. Amal Sene adividual performance - - Stak Options iBUegmeat heuceave dtw~eOd eanaement appraceal wich SAMS formal& 00 aoeoe

losng mevate esietiem

remained. admmmces and

tooala

cnik-lot

PERFORiii5Ct-RSSlO NARSIIT-ASED SVwATPAUCSOWS INCzNTIvS PLANS SQUITV MSUSING PLANSt EQWiTY *UILI5G PLANS BUSINESS NAAGa.FWN

CONTRACTOR Typo CrIteria TYPO Crteria Type Criteria OnALS CL.IMATE

Ford Moter Ceopasy Arneal So..s 1-ow0 netr euced -- Stock options Nsoamae6 ..... t of Capitol .15th SAt. forml&

Cecerat Dysanica Amseel 3.00. Profit* before tax -- stock options Ibneoe tCorporation met *useed 14 Portent foema

rowlere . preseta"d peteetialcoetribateeeosber, of year.

4e to "Wre.each.4""te ofVI

Santa

Coasal Zectric: Compay Anual So... Pat ceoolidated Ferformee WOsamst Slthci Opions Iosaemt forml tepehot bet ;oca-I raralea ad fels plan feemls coa,e.. riak-eor..

m eme fermi.colol toptta it steeareetesteace of olae oeeeor.te now terheeleff

Georal motr Corporatlca Amouat Souue Corporate aad dietlsal -- SlothL Optlams boeeot %to". "rid Camtralso prodectprofit gpoiss perfouauce feoml& 'iae Innovator aseeublyl deceetret toeof isfividel. managers to mmfactuine WSta stable corporal.

.a Protect dosag cellerej resoe forhiterarchy and leyalty

rseral Sieplese Badt LAcal soma Saturn am equity aet--cSectreeice Corporation eoceet 102; eareteg per

Ober* forgol compoetisAs litvitealle per-

formance goals.

tong-Term F ear coe etSousen f 101lo periermesce

targets

rostl Tires and Annuel SoMe Not arivleble St- bet apt-low Noslaemeot a.1 eorwolim Lark ef legicalRobrCompany Cetel& Sole @*p"rate s&opresot at I.ter

Deforrad Sot ovilable esupatlee to sod corporate Cenal-iSes.achiteve bigber oartS.; Aerelt goe"Ie

sackt Pr iee OeeCeiea have Soonasemosy, men thee baeore,

.PBRFwNU -ecASO VN3W-§Au SYILUCCBoonS ICKWITIY PL.ANS RitV W~ILDBOP Flub @"ITT WILDIM 11AM 600110111 NAAMI

MTATAType Criteria Type Criteria Typa Criteria SILSO.IMTK

Godear Mir and Prit-Skarlag Cceelida.1too met $ to*k Optiams eegmetR.bher Company Ties sett e =*de forest*

atoig capitalstack; ivIvieaalat epee, Ac sGottprof it cad NOT gcale

lo Crprtis" &Lae Booee t"rec profits met - - etrietad nomeaseci Dlate Wt ofonce"d 1" of average Soc Awards taenis plea fese IesInvesed capital caicd sedlee

emlyment baesess

Stack Options Wacgeeaca SAAS foemic

Wrelas. Iet. Samsel Ms Lfter tex preofit "Vtrferseo PVacgSsel Restrictad Stash Wosssw Ovairs far mooer astromm concralimaiiem.that owceeda stack- csaite c formala LAow& formic rWea. commtted rawecaised &lassholder Investetandee istledee atare to Mb capital fnctemol lIee la&gelea-tan' debts deveoep of cervices ap-dif threv termsmar Is magemeteast of ieasvottaea a readerefand eeL. wmC ak threatisrealae that lead is Peat. Proess.t at tct-cuttlesgItai beeslil or cat facer higme alue-added.enter eperctaes coairibatieee las teat prodoter

to tbslais

*&OPckrd Compay FwalitShrieg Profits before tese tsh dtImme Is Is mastle.. 'big us5 belesa of awall,asas silh"alo tog IemI apaisc stre divisicaw

Tomse Baco to Fear@ of service reliability cadcompany Garvice

mom INCIATIVi PLAN. iQUIT? BUIILDING LAS SOtRF WILINGie PLANS umiw SRCIRACTOR Type Criteria Type Criteria TMp Criteria GOAL CLIAS!

Soeywaii. Inc. A...I Se" Forml& imelodem Ferferasea Long-term stock Parch..., "most-*"corporate and eIt shares Plea ernins Irmeperfomanece. ad: grothl amdledividel per- ether per- Steck opion Ibagmeestc~rosecm ard foreoon ormic

pro-ontablishved factorstorgmtaj A Videaoeof at least So4 Par*he,. mst be poa

Lomg-Tar. Doe Mnagemn formil&Aga ceetia.edeplaymmat three&%retirmnt

degba Arcraft Compay Deta eat ewaliahia build gook flew,emotimn e. arr iiiapadiug. seeh long-tar. eategc Scale atempemems af shrt-termprofits a* rehr blob

latermatemai buamoae deol be~m iadividse* omalt - tech Optioes ihteageat Doae imstlemthia Corporation god carper.!.o wick SAO fermi. processing mate.

elsmocal perfarmace. boost growth ratefar earperetet cmese ao IS-la per poar.I Ies. asi greeth oed lea teon predeer.ler "oraeting "sit eaftest japemoee

bummiea sies" enoetities.volum grewth cad

iloeftial gcale.

Interet local leleploem hAma baaon Camldested at& performatce warmiag per $teo* optin beseeatadTelegreph Imtam mat Oecee bait plan @Mae grooth with soi (*WWI&Crpoatio le Li o erhadare rae $noater

averege egmIty thee 6xeessityp

4F

FIERFRMAR-11AMP SMIMER4&iI SMRIIICSOWS INCZWtIVC FLAPS NQiIlT UgILSNG PnS nAlWISNS PLi IMSS MNGICWIr

OWATRTYPO Crieria type Crita teCriteri a COALS CLIMATI

Itoh cotperatloa, haooal 9oag Ibamemt clsi -tc S s ptim mael

leeled. yasitS.. form!.C1aaollleatloe. Gadaceieeat ofpetfafeme 6el0 byeat a" lidlylo

Lass-TOM. At leat 3 Fast targetsSees to aethloVO growthb to

511. vet O Ioty.weots? ""ot. or

other gool.

oe Stapler See. Amoal Slotte- wsoos, aptlo fte S ~ m pite" "Modas" Per evet $1 ON Stteog belteoretSoicoery Ismw. formuls total asts, got ploemels. dp leest

both $2 to Sas!" profiStable prodactes, which got 4- 1Slose at year.Oet to proefiti O.hoss profits

a" ptodeltlwltyite. loisettlee lme. Algol leads Sot eerlp beoeo Lem-tw 01101800001 gal5.es aeetatleft Tighte. operet So

tee "et one"a 1531 Slock fermuse to deeamw *lee- eastrel.aborehlOUST aptos Seeledog teefe. m ferlylovesomeo flm with leog-teo

Lcheed Cerposttlea - at*& 5m Iptlme I SeeaSWith SAM Nermis

Lorl Carpratiom hoosl Sen bfemeses: Ceeals hled $ task spite= bag utto profele O0d as"h im lfeoeleobJectvee me well 00

divIolas sonessg

hoMe! Som Aebleegmet ef at let152 bigger after taxWaolls Shem orslao Mart

BOVAS ICCEN.iS MAPS mom uII*IG KAN MpIT BUIDN TNS MISiWSwiAUCONTRACTOR Type Criteria Typs Criteria TYPe Criteria cOam OINATZ

LTV Corporatism Ameol DON. pre-detet~iow prof it Potisime tome-tam Stock Op.. Noeee$o I opeadsgepcgoals tor the corpora- omite riom Scale of lorml aod oil genvieite and Pef it eosetee. prof it ad tsdootriest Beestm"ely, at prof its ro tos - ceetribation of

before tsue mmeto Toeegk to eporet logieee.. of olvestt oN

4ertle lbristle Lomel Rome Achievement of pre, - Sa Optioss iogmCorporat ion eatebliosd objectives .0th SoN fora. Oed

cost immedMVepYNst

mee i huogesAeoi be Nor soeloag met exceed - --- Diversity 1; Highly rooaerwet ieCesti. low, 62 rhberaoi exioufag hboaoso; riek-evors style.Ca ... sa epeie oartiers share ef peter" as samgoset.

Individosl pefemes -gesmet dscieies "ad baed"hosiose me coniative easlysis

itre Corpoedioa Data ot available -

inorh Acetates Phlilip. --- stock opime Nmegosse Strssbion specatismCeress with gs formula tight"o sweemeatrperstiescontreo. Forme

Northrop, corporatis Ansol Soos. Nsosost taosie hes sag-ta,. n-, yewr -es corporate perfoau.. ioosti,. grooth Islocbsdieg estate on plot eroiogequity. ettaimot of par shwe.profit objectives. amcestrats. ass piulsetdeaetousoit. Voers socompeay staests oindivibol paefesoem

ythss iseis ta pitao Boeos

dorob

4-00

COChTMType Criteruia TMl acingio Tyo crater"o GnuCLIA

WACrporatsm A.l kme Nons %X of capital $to 0*ptions Naega-t is" ros l @-'a .00m poltickingemloed mat be eored wth am Cotel ad planning smbm- ad Wesslitng

visa. coitent Isterualyto *Interess

RabaIt ernational Asel kom get 00,00 Perfecoeas law n slash k o ptions manaementcoporation unit@ plan isi to with SAM Cereals

daes Assoiates. lme. Ameunt kom tope.grup OW partto~ 3 pot $to& sputm Vkeqmadivision Mlen 00 vast rise Elemetal formal&projected "ate and patemelearnt Iffdvtde per- offet% peal.

proltbilt of aparticuar costraeegtehnical of delivery

swam fletoe eep bogs ae" available

Ile.a5 Comanes. e. Corporae Caeldeled lame - - ea atae umHmlom met profitem belatery meagmotamast km* before gaees easend me restrited (ermoe ba comptitive with to lives almst

to perctof atrweholder Stook awte tehetm profit cmplete "ared*erpavt moreover

somet jAn Managmnt tomla

aw ormpeer rIt km@ hbowsoe of tdIvtt - S tock Options mom es- nladhtltty Io n~eoemorgaelotea and comany with Ma toao and weetraterte

paetreeaae oh jectiom aol aetsead company to be Outesmovellp amplormet 0 ga"d to ebague

iso..m

S015S IUN~rIVK PLANS EqUtT WUILDING PLAN MWT1 WILDItNG MAN USIos "neCOIITAC1111 TYPO Criteria Type Cr iteria yp Criteria CrkU MIAtC

Sporry Corporation0 Ameal se..a "gosaera formls - Stock Optiona Bbeeaae a $100 blilteeformla company by I", ittb

earsimgpfil e

aM plean Negeaformula

Sumdatread corporatiton Dentricta egatty to high teeco astoc pte .em. eabuge" big% profits

raturn, ergerleaderabip

rdrp corporation vate meat vailable

*iadpeme. Ia". afel 5~ee Mnement approil OaW I -sseis -n Imprteot toatsuh boxeasoatimaed service technical ebee, ae a small prof it

trotter rather thee enter; pet 'blabprial atlitee risk rGia corpoirateOe ot blob retuae ak oh - opitaprojects ahesId wnfagrators at leat 20Iao total assets

easa Instrumants Iae. - - P morfsec Greet% is stock options Daaaeaea control of smaote 'tre" NoSait plea et Isem formula key"d assat turnoer. orally. Peer

se t leao i idivid"aI a"h flea aetitie a mawe ea" career targets. Otron1ies62 of et primr peer per-Capital fargese. futue

potential maro& Is oremi-

sattew

Augus barn Rogowd carvaes empeclfone oebjsetivee

N3FOUk~mI-i*I3 PAI331-DAMS STRATEGICsasoo I ZVmIw ILL11 "VITT MInii*IN PM IPWITT WILDING MASS 5U118S MAKomw

CWTAORType Criteria Type Criteria TyeCriteria WAU CLIAT

'Thiokl Corpoetim Anual Wae Not ancme baere tango Perforance Long-term Suc Opium basnt S Fewr plan to be loeMact exceed lot of matte Fle (4 peer) lereel. Dapel depealeat a. Boerne"

aepe, eel asith. ac at Doais to Bromet to Contats; etqeialleCovet lais"at a" ee trem". eea. Im. specialty eheialm!*allvlde "d wage t In mihe dealeest smu~t share;

objectives Coanye Olash proprietary Peesiio

1".Annual Banco lnellee, mlt, eel - *a edoptions Iheftmft 232 esate elo saUrl-eeeeCOMPeAYperforsaeee.Ia legl b on formla reel preflte;I ee, lbeet profit

U.sue TerbeselegIte eael, beeas leratag beforte tam Periemeres Achievemnt AnealS sles of SIM reft strellsedrporatles SutWmoflw* illon bylng*Mg ,

tagee Adiversify mp from, Cf cosistsereassrespee0-9s et all to eon pel tfoml e"oaesa oer Iog eight tencete

tC apprafiale Imports"tha obeperating eaeeeis*~t. softel b t calpital I ee atlostitiY% a jet evelna hilkef fart af preatt torset

htielgphse Electric Almost ieee Baio seuhr. tefreee 4 Pear Breach egg i clea bAsmeeas shift to 0ee 41rvtc*r.rPeralee Mofeeee re Plan to roate em leinia business, begaleeete

inentaed n oewy

Capto

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