8-KMaterial AgreementsOther EventsExhibits & Filings

WILLIAMS COMPANIES, INC. 8-K Report, Material Agreement (Mar 7, 2006)

Filed March 7, 2006For Securities:WMB

Summary

This 8-K filing from The Williams Companies, Inc. (WMB) on March 7, 2006, details the Compensation Committee's actions regarding executive compensation based on the company's 2005 performance. The company exceeded its Economic Value Added (EVA) targets for 2005, leading to the approval of significant incentive payouts and the release of previously reserved awards from the 2004 program. Additionally, a portion of performance-based deferred shares from both the 2004 and 2005 award cycles were earned and certified based on the 2005 EVA performance. The filing also outlines the approval and grant of 2006 equity awards, including stock options and performance-based and time-based deferred shares for key executives and other employees. These 2006 awards are tied to future performance targets, primarily improvements in EVA, and have specific vesting schedules and conditions. Investors should note the company's commitment to performance-based compensation, linking executive pay directly to financial metrics like EVA.

Key Highlights

  • 1The Compensation Committee approved significant incentive payouts for 2005 under the annual incentive program due to exceeding EVA targets.
  • 2Executive bonuses were awarded, with the CEO, Steven J. Malcolm, receiving $2,300,000.
  • 3One-third of reserved 2004 annual incentive awards were approved for payment, including $164,444 to the CEO.
  • 4Performance-based deferred shares from 2004 and 2005 awards were earned and certified based on the attainment of 2005 EVA performance targets.
  • 5New equity awards for 2006, including stock options and performance/time-based deferred shares, were approved and granted on March 3, 2006.
  • 6The 2006 performance-based equity awards are primarily tied to EVA improvement targets over a three-year period.
  • 7The Compensation Committee reviews EVA calculations to ensure fairness, considering factors like mark-to-market accounting and non-recurring items.

Frequently Asked Questions

The primary driver for these compensation actions is the company's performance in its 2005 annual incentive program, specifically exceeding the Economic Value Added (EVA) targets set by the Compensation Committee. This achievement led to both cash incentive payouts and the earning of performance-based equity awards.

The filing details cash bonuses under the 2005 annual incentive program, the release of previously reserved 2004 annual incentive awards, and the certification of earned performance-based deferred shares from both 2004 and 2005 award cycles. Additionally, new equity awards (stock options, time-based deferred shares, and performance-based deferred shares) were granted for 2006.

The 2006 equity awards consist of stock options, time-based deferred shares, and performance-based deferred shares. Stock options and time-based deferred shares vest over three years. The performance-based deferred shares are contingent upon the recipient remaining an employee until March 3, 2009, and the company meeting performance targets, primarily focused on improvements in EVA, over the three-year term.

EVA is a measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis. In this filing, exceeding EVA targets signifies strong operational profitability and value creation, directly linking executive compensation to the company's financial success.