8-KMaterial Agreements

WILLIAMS COMPANIES, INC. 8-K Report, Material Agreement (Dec 20, 2005)

Filed December 20, 2005For Securities:WMB

Summary

Williams Companies, Inc. (WMB) announced on December 16, 2005, the approval of a new long-term equity compensation program for its executive officers, effective in the first quarter of each performance period. This program is designed to align executive compensation with company performance by focusing on improvements in Economic Value Added (EVA) over a three-year period. The structure of the program allows for the Compensation Committee to set specific three-year EVA improvement targets. The number of performance-based shares earned by executives will be directly tied to the achievement of these targets, with payouts ranging from 0% to 200% of the target shares based on performance levels between a threshold and a stretch goal. This initiative aims to incentivize long-term value creation and shareholder returns.

Key Highlights

  • 1Williams Companies implemented a new long-term equity compensation program for its executive officers.
  • 2The program links executive pay to company performance through performance-based shares.
  • 3Performance targets are set over a three-year period.
  • 4The primary performance metric is improvement in Economic Value Added (EVA).
  • 5Executives can earn between 0% and 200% of target shares based on EVA achievement.
  • 6The Compensation Committee has the authority to set specific EVA targets each performance period.
  • 7This initiative aims to align executive incentives with long-term shareholder value.

Frequently Asked Questions

The main purpose is to incentivize executive officers to improve the company's long-term financial performance by tying a portion of their compensation to improvements in Economic Value Added (EVA) over a three-year period.

Compensation will be determined based on the number of performance-based shares earned. The number of shares earned depends on the achievement of specific, pre-set three-year EVA improvement targets. Executives can earn between 0% and 200% of their target shares, with the payout level based on performance relative to the EVA goals.

Economic Value Added (EVA) is a financial metric used to measure a company's true economic profit. It is calculated by taking the operating profit after tax and subtracting the cost of capital. Improvements in EVA indicate that the company is generating value above and beyond the cost of the capital it employs.

The new program was approved on December 16, 2005. The first performance period will begin in the first quarter of the following year (2006), and the Compensation Committee will set the three-year performance targets at that time.