Annual Report - CoBank

Senior Officers Compensation Discussion and AnalysisCoBank, ACBBased on the corporate performance factor, participants can earn from zero to 200 percent of their individual long-term incentivetarget. Payments are typically made during March of each year following the end of the three-year performance period to which theaward is applicable. Participants are not eligible to receive a full payment at the time of the scheduled payout if their performance didnot meet expectations during the performance period, or if their employment terminated for reason of retirement, death or disabilityduring the performance period. Participants are not eligible to receive any payment at the time of the scheduled payout if they are nolonger employed by CoBank for reasons other than retirement, death or disability, unless otherwise provided for in an employmentagreement. The key elements of the actual payout are described below.Long-Term Incentive Target — For the 2009 through 2011 performance period, the long-term incentive target for thePresident and CEO was 125 percent of salary. For the remaining senior officers, the targets ranged from 40 to 80 percent.Corporate Performance Factor — Corporate performance is determined at the end of a designated three-year period based onactual business results relative to a balanced scorecard of bankwide financial and strategic business objectives, as establishedat the beginning of the three-year performance period by the Board of Directors. The Board of Directors retains the right tomake adjustments to the corporate performance factor, where appropriate, in addition to providing a subjective performanceresult for the achievement of strategic business objectives.CoBank utilizes a balanced scorecard for measuring long-term corporate performance to emphasize overall success inexecuting our strategy and managing risks. The long-term corporate scorecard establishes certain key performance indicators,of which 80 percent focus on the achievement of specified financial measures related to profitability, loan quality and capitaladequacy, and 20 percent focus on the achievement of strategic business objectives, as determined at the beginning of eachthree-year performance period by the Board of Directors. The final performance result, or corporate performance factor, isdetermined by comparing the actual performance of each measure to the targets established at the beginning of each threeyearperformance period. Each scorecard performance measure is weighted separately, and the factor is set such that ifperformance of each measure exactly meets the established target, the result is a performance factor of 100 percent. Thecorporate performance factor can vary from zero to a maximum of 200 percent, depending on performance against thetargets. The Long-Term Corporate Scorecards for the three-year performance periods 2009 through 2011, 2010 through 2012and 2011 through 2013 are as follows:Long-Term Corporate Scorecards:2009 – 2011, 2010 – 2012 and 2011 – 2013 PeriodsPerformance MeasureWeightNet Income 20 %Permanent Capital Ratio 20 %Return on Common Equity 20 %Strategic Business Objectives 20 %Loan Quality (Adverse Loans to Risk Funds) 20 %CoBank 2011 Annual Report133