What is the main purpose of the new 2010 Executive Annual Discretionary Award Plan?

The main purpose is to ensure that executive compensation qualifies as 'performance-based compensation' under Section 162(m) of the Internal Revenue Code, which offers tax advantages to the company. This is achieved by linking payouts directly to the achievement of pre-determined business or financial goals.

How will executive bonuses be determined under the new plan?

For fiscal year 2010, bonus amounts will be determined by first assessing an eligible employee's individual performance via a 'leadership score.' This score will then be used to determine a percentage (ranging from 0% to 100%) that is applied to the cash amount earned under the company's 2005 Plan based on achievement of pre-determined performance objectives.

Does this change affect all employees or just executive officers?

All employees who currently participate in the 2005 Executive Annual Incentive Award Plan, which includes the company's executive officers, will be eligible for bonus payments under the new 2010 Discretionary Plan.

Will the company still have discretionary bonuses?

Yes, but the 'discretionary' aspect for 2010 payments is now tied to the assessment of individual performance (leadership score) which then determines a multiplier for the performance-based payout. The core payout is still driven by pre-determined objectives, but the final bonus amount has an individual performance component.

XEL/XELLL 8-K: Leadership Changes

Summary

Xcel Energy Inc. (XEL) filed an 8-K on December 21, 2009, to report a key change in its executive compensation structure. Effective December 16, 2009, the company's Board of Directors approved the 2010 Executive Annual Discretionary Award Plan. This new plan is designed to replace the discretionary component of the existing 2005 Executive Annual Incentive Award Plan. The primary objective of this change is to ensure that incentive payments qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code. This is achieved by tying 2010 payments solely to the achievement of pre-determined business or financial goals. While the new plan introduces a "leadership score" for individual performance assessment, the ultimate bonus amount will be a percentage (0% to 100%) of the cash amount determined by the achievement of these pre-set performance objectives.

Key Highlights

1Xcel Energy Inc. established a new 2010 Executive Annual Discretionary Award Plan.
2The new plan replaces the discretionary component of the existing 2005 Executive Annual Incentive Award Plan.
3The primary goal is to ensure executive compensation qualifies as "performance-based" under IRS Section 162(m).
4Payments for 2010 performance will be based solely on achieving pre-determined business or financial goals.
5All employees participating in the 2005 Plan, including executive officers, are eligible for the new discretionary bonus.
6Bonus amounts will be calculated by multiplying the 2005 Plan payout by a percentage (0%-100%) tied to an individual's leadership score.

XCEL ENERGY INC 8-K Report, Executive Changes (Dec 21, 2009)

Summary

Key Highlights

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