What are the key financial metrics for Honeywell's 2010 annual incentive compensation?

The key financial metrics for the 2010 annual incentive compensation plan are Earnings Per Share (EPS) with a target range of $2.20 to $2.40, Free Cash Flow Conversion (FCF Conversion) at a target of 137%, and Working Capital Turns (WCT) at a target of 6.0.

What is the Growth Plan and what are its performance targets for 2010-2011?

The Growth Plan is a cash-based long-term incentive compensation program that Honeywell is reinstituting after a one-year suspension. For the 2010-2011 performance cycle, the financial objectives are Total Revenue, targeting $65.36 billion, and Average Annual Return on Investment (ROI), targeting 20.29%. These metrics exclude the impact of acquisitions and divestitures.

How are the Growth Plan awards structured and paid out?

Fifty percent of the earned Growth Plan awards are paid in the first quarter following the completion of the two-year performance cycle. The remaining 50% is deferred and paid one year later, contingent upon the executive's continued employment with the company on the payment date, a feature designed to encourage retention.

Are there other factors considered besides financial metrics for executive compensation?

Yes, besides achieving the set financial objectives for both annual incentives and the Growth Plan, the Management Development and Compensation Committee also considers other factors. These include other key performance measures (e.g., segment profit, margin expansion, revenue, quality of earnings, relative performance), individual management objectives aligned with company initiatives, and demonstrated leadership behaviors.

HON/HONIV 8-K: Leadership Changes

Summary

Honeywell International Inc. (HON) filed an 8-K on February 19, 2010, detailing the decisions made by its Management Development and Compensation Committee on February 12, 2010, regarding executive incentive compensation for 2010. The company is re-establishing its annual incentive compensation program based on key financial metrics: Earnings Per Share (EPS), Free Cash Flow Conversion (FCF Conversion), and Working Capital Turns (WCT). These metrics will determine annual bonuses paid in the first quarter of 2011, with specific targets set for EPS ($2.20 - $2.40), FCF Conversion (137%), and WCT (6.0). Furthermore, Honeywell is reinstituting its Growth Plan, a long-term, cash-based incentive program, after a one-year suspension. This plan will cover the 2010-2011 performance cycle and will be measured against total revenue growth (excluding acquisitions/divestitures) and average annual Return on Investment (ROI). The targets for this cycle are $65.36 billion for total revenue and 20.29% for average annual ROI. The Growth Plan awards are structured with 50% paid after the cycle and the remaining 50% deferred for an additional year to encourage employee retention.

Key Highlights

1Honeywell's Compensation Committee set the 2010 financial targets for executive annual incentive compensation: EPS ($2.20-$2.40), FCF Conversion (137%), and WCT (6.0).
2The annual incentive plan considers not only financial metrics but also other performance measures, individual objectives, and leadership behaviors.
3The Growth Plan, a long-term cash incentive program, is being reinstituted for the 2010-2011 performance cycle after a one-year suspension.
4Key financial objectives for the 2010-2011 Growth Plan are Total Revenue of $65.36 billion and Average Annual ROI of 20.29%.
5Total Revenue and ROI targets for the Growth Plan exclude the impact of acquisitions and divestitures.
6Growth Plan awards are paid 50% after the performance cycle and 50% one year later, subject to continued employment, to promote retention.

HONEYWELL INTERNATIONAL INC 8-K Report, Executive Changes (Feb 19, 2010)

Summary

Key Highlights

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