SEC rules call for CD&A disclosure of performance-related factors considered by board or compensation committee

• Regulation S-K, Item 402(b)
• Instruction 4 to Item 402(b)
• Supplemental narrative called for by
  Regulation S-K, Item 402(e)

May omit specific target levels that involve confidential information, the disclosure of which would cause competitive harm to registrant

• Same standard as request for confidential treatment of confidential trade secrets or confidential commercial or financial information in Securities Act or Exchange Act filing

• Securities Act Rule 406
• Exchange Act Rule 24b-2
• Staff Legal Bulletin No. 1 (with Addendum) which sets forth views of Division of Corporation Finance with regard to confidential treatment requests

• Registrant not required to submit request for confidential treatment under SEC rules
• SEC Release 33-8732A  II.B.2

• SEC FAQs  Question 3.04

However, if performance targets are omitted, registrant must discuss how difficult it will be for the executive or how likely it will be for the registrant to achieve the undisclosed target levels or other factors

2007 disclosure precedent reflect companies' reluctance to disclose EPS or other financial metrics used as performance targets for incentive pay

See Staff Observations:  Review of Executive Pay Disclosures for information on SEC staff's review of 2007 proxy disclosure of performance targets

SEC comment letters:
SEC staff review of 2007 executive pay disclosures

CD&A includes statement that disclosure of specific target levels would cause competitive harm

Disclosures of specific performance targets

SEC_CODE_REF_0090001192884

CD&A includes statement that disclosure of specific target levels would cause competitive harm

• Bob Evans Farms 

• We are not disclosing the performance targets and actual performance measures for these goals because they represent confidential financial information that we do not disclose to the public, and we believe that disclosure of this information would cause us competitive harm. We believe that these performance goals were difficult to achieve for the following reasons: [discussion follows with regard to these performance goals]

• Dell 

• Management believes, and the committee concurs, that the specific strategic initiatives and performance goals established for the Global Growth strategic priority during Fiscal 2007 represent confidential business information, the disclosure of which would result in meaningful competitive harm.

• IBM 

• Because disclosure of the specific targets under the Annual Incentive Program would signal where IBM is shifting strategic focus, give competitors insight to areas where IBM is changing investments or divestments and impair IBMs ability to leverage these actions for competitive advantage, IBM is not disclosing these specific targets. The targets are set at aggressive levels each year to motivate high business performance and support attainment of longer-term financial objectives. These targets, individually or together, are designed to be challenging to attain. Knowledge of the targets could also be used by competitors to take advantage of insight into specific areas to target the recruitment of key skills from IBM. In addition, disclosing the details of our productivity metric provides confidential information we currently do not publicly disclose which would put at risk our ability to leverage for pricing competitiveness. Disclosing the specific targets and metrics used in the qualitative discretionary assessment made by the Chairman and CEO would give our competitors our insight to key market dynamics and areas that could be used against IBM competitively by industry consultants or competitors targeting existing customers. Also, the Companys financial model, as explained to investors, is a long-term model, with objectives and drivers for top line growth and EPS. The Company does not manage its financial model on a short-term or annual basis. Disclosing short-term compensation objectives would run counter to the Companys core financial model and could result in confusion for investors.

• Level 3

• The target levels for 2006 are considered confidential, the disclosure of which would cause competitive harm to us. The Compensation Committee believes that the target level of performance for the objectives in any given year should not be easily achievable, and typically would not be achieved all of the time. As for obtaining the higher level or greater payout, the Compensation Committee believes that this level would typically be achieved less often than the target level of performance. However, the Compensation Committee recognizes that the likelihood of achievement of either level of payout in any given year may be different, and believes that the payout should be appropriate for the performance, regardless of how often it may happen.

CD&A includes disclosure of specific performance targets

• Parker-Hannifin
• Bank of America

• Biogen
• Bob Evans Farms

• Some performance goals not disclosed

• eBay
• CA, Inc. 

• Notable discussion of revisions made by compensation committee in second quarter of 2007 to target performance measure for adjusted cash flow from operations and related incentive payouts

• Factory Card & Party Outlet
• General Electric

• See discussion of CEO compensation on page 19

• H.J. Heinz

• Disclosure provided as part of narrative discussion following Summary Compensation Table and Grants of Plan-Based Awards (rather than CD&A)

• Honeywell International
• McKesson
• Target

CD&A includes disclaimer with regard to performance targets

• Alliant Techsystems

• The above performance goals are not a prediction of how ATK will perform during the fiscal years 2008 through 201.  The purpose of the goals, which were approved by the Committee in March 2007, is to establish a method for determining the payment of long-term incentive compensation.  ATK is not providing any guidance, nor updating any prior guidance, of its future performance with the disclosure of these performance goals, and you are cautioned not to rely on these performance goals as a prediction of ATKs future performance.

• McDermott International

• The following discussion and analysis contains statements regarding future individual and company performance targets and goals. These targets and goals are disclosed in the limited context of McDermotts compensation programs and should not be understood to be statements of managements expectations or estimates of results or other guidance.  McDermott specifically cautions investors not to apply these statements to other contexts.

Cleary Gottlieb

• The Materiality of Performance Targets  9.14.07

• Note 12.05.07 response from Southern Union to SEC comment on performance target disclosures, and subsequent SEC clearance letter

Executive Compensation Disclosures

S-K Index

Equity Compensation Accounting

Staff Observations  Review of Executive Pay Disclosures