Annual Report - CoBank

Senior Officers Compensation Discussion and AnalysisCoBank, ACBCaps on Incentive Payments – Our incentive compensation plan payments are subject to caps that limit the maximum award thatmay be paid.Minimum Performance Requirements for Each Metric – Our incentive compensation plan payments are contingent uponachieving minimum performance levels for each financial performance goal.Approval of Plan Funding – The Committee approves all incentive plan funding following a review of the Bank’s performanceagainst plan performance criteria established and approved prior to the beginning of the incentive plan performance period.Shareholder Return – A minimum return on active patron stock investment must be achieved for incentive compensationpayments to be approved.Additionally, in 2011, the Committee completed an assessment of compensation-related risks for all of our employees. Based onthis assessment, the Committee concluded that our compensation programs do not create risks that are reasonably likely to have amaterial adverse effect. In making this evaluation, the Committee reviewed the key design elements of our compensation programs inrelation to industry “best practices” as presented by the Consultant, as well as the means by which any potential risks may bemitigated, such as through our internal controls and oversight by management and the Board of Directors. In addition, in 2011,management completed an analysis of incentive programs and reviewed the design of these incentives both internally and with theConsultant to conclude that such incentive programs do not encourage excessive risk-taking.The President and CEO has elected to receive retirement benefits payable pursuant to the SERP and ERP in the form of anannuity, as opposed to a lump sum. The Committee believes this arrangement enhances the focus on overall risk management and thelong-term success of the Bank.CoBank 2011 Annual Report136