What specific executive perks are being eliminated by Parker-Hannifin?

Effective January 1, 2008, Parker-Hannifin is eliminating home security, financial planning, tax preparation and estate planning services, tax gross-ups on spousal travel, monthly dues and related tax gross-ups for private clubs, and health and fitness club dues for its executive officers.

How will executives be compensated for the elimination of these perks?

In place of the eliminated perquisites, executives will receive additional "Return on Net Asset" (RONA) Bonus shares, which will be paid out in cash. The amount of these bonuses is determined by a formula based on the company's performance relative to its net assets.

How is the RONA Bonus calculated?

The RONA Bonus is calculated by dividing year-to-date segment operating income by average net assets. A tiered multiple is then applied to this return, with different rates for returns at or below 35% and those exceeding 35%. This calculated multiple is then applied to the executive's midpoint base salary range for the fiscal year, with a pro-rata adjustment since the bonus award was made mid-year.

Will these RONA bonuses affect other executive benefits or retirement plans?

Yes, the filing states that these additional RONA Bonuses will be excluded from benefit calculations under the Corporation’s Executive Long-Term Disability Plan, Consolidated Pension Plan, Pension Restoration Plan, Supplemental Executive Retirement Benefits Program, and Change in Control Severance Agreements. They are also not eligible for deferral under the Corporation’s Retirement Savings Plan, Savings Restoration Plan, and Executive Deferral Plan.

PH 8-K: Leadership Changes

Summary

This 8-K filing from Parker-Hannifin Corporation, dated December 13, 2007, announces a change in executive compensation strategy. Effective January 1, 2008, the company's Human Resources and Compensation Committee has decided to eliminate several executive perquisites, including home security, financial planning services, tax gross-ups on spousal travel, private club dues, and health club memberships. In place of these eliminated benefits, the company is awarding additional "Return on Net Asset" (RONA) Bonus shares to its executive officers. The filing details the calculation methodology for these RONA bonuses, which are tied to the company's segment operating income relative to its net assets. While the perquisites are being removed, these new bonus awards will be paid in cash and are subject to specific payment schedules and reconciliation processes based on year-to-date results. Investors should note that these cash bonuses will not be factored into certain long-term disability, pension, or severance calculations, nor will they be eligible for deferral under specific savings plans.

Key Highlights

1Parker-Hannifin is eliminating several executive perquisites effective January 1, 2008, including home security, financial planning, tax gross-ups on spousal travel, private club dues, and health club dues.
2In lieu of these perquisites, executives will receive additional Return on Net Asset (RONA) Bonus shares, paid in cash.
3The RONA bonus calculation is based on segment operating income divided by net assets, with a tiered multiple applied.
4Named executive officers receiving these additional bonuses include Donald E. Washkewicz (1.30 shares), John D. Myslenski (2.00 shares), Timothy K. Pistell (2.00 shares), Lee C. Banks (1.60 shares), and Robert P. Barker (1.60 shares).
5Payments for the CEO, CFO, and other senior executives will be a lump sum in August, while other executives will receive payments in two installments (April and August) with a 25% holdback.
6These additional RONA Bonuses are excluded from calculations for certain executive benefit plans, including long-term disability, pension plans, and change-in-control severance.
7The RONA bonuses are also not eligible for deferral under the company's Retirement Savings Plans.

Parker-Hannifin Corp 8-K Report, Executive Changes (Dec 13, 2007)

Summary

Key Highlights

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