Compensation Structure and Instruments
Compensation instruments under this Compensation Policy may include the following:
Equity-based compensation; and
Retirement and termination of service arrangements.
Variable Compensation Ratio
Elbit aims to balance the mix of “Fixed Compensation” (comprised of base salary and benefits, on an annual basis) and “Variable Compensation” (comprised of cash bonuses and equity-based compensation) in order to, among other things, appropriately incentivize Executive Officers to meet Elbit’s short and long-term goals while taking into consideration Elbit’s need to manage a variety of business risks.
The pay mix ratio between the Fixed Compensation and Variable Compensation is such that the total Variable Compensation of each Executive Officer shall not exceed 75% of the total compensation package of such Executive Officer, on an annual basis. This pay mix ratio supports the core principles of Elbit's compensation philosophy of compensating for performance and aligning Executive Officers’ interests with those of the Company and its shareholders. The above pay mix ratio may vary somewhat in any given calendar year due to fluctuations in the NIS/USD exchange rate. The Compensation Committee and Board believe that such ratio expresses the appropriate compensation mix in the event that all performance objectives are achieved and assumes that all compensation elements are granted with respect to a given year.
Intra-Company Compensation Ratio
In the process of formulating this Policy, Elbit’s Compensation Committee and the Board have examined the ratio between employer costs associated with the engagement of the Executive Officers and Directors and the average and median employer costs associated with the engagement of the other employees of Elbit, as required pursuant to the Companies Law, (the “Ratio”). The Compensation Committee and Board believe that the current Ratio does not adversely impact the work environment in Elbit.
The possible ramifications of the Ratio in the work environment of Elbit will continue to be examined from time to time in order to ensure that levels of executive compensation, as compared to that for the overall workforce, will not have a negative impact on work relations in Elbit.
Monthly Base Salary
The monthly base salary (the "Monthly Base Salary") provides stable compensation to Executive Officers, allowing Elbit to attract and retain competent executive talent and maintain a stable management team. Monthly Base Salaries vary among Executive Officers, and are individually determined taking into account the educational background, prior vocational experience, qualifications, role, business responsibilities and the past performance of the Executive Officer.
The maximum Monthly Base Salary paid to Elbit's Executive Officers shall not exceed:
With respect to the CEO - 200,000 NIS, linked to the increase in the Israeli Consumer Price Index (the "CPI"); and
With respect to an EVP - 160,000 NIS, linked to the CPI.