|RELIANCE STEEL & ALUMINUM CO filed this Form DEFR14A on 04/08/2019|
encourage her retention. Our annual cash incentive award program provides all NEOs with the same target annual cash incentive award opportunity of 150% of their respective base salaries based on identical performance objectives.
The base salary payable to each of our NEOs is the minimum compensation that such executive receives in any year. Base salaries reflect the individual skills, experience and roles and responsibilities of the executive officer within the Company.
The Compensation Committee uses pretax income margin as the metric for measuring the Company’s financial performance under the annual cash incentive plan. The Compensation Committee selected pretax income margin because it is the primary metric used in the Company’s corporate and operational decision-making, including capital allocation. The Compensation Committee believes that pretax income margin is a good metric for purposes of the annual cash incentive plan as it incentivizes our management to increase our long-term profitability and efficiency.
In concert with the Company’s compensation philosophy of overweighting performance-based pay, our NEOs have annual cash incentive opportunities that may result in higher cash payments than those for comparable officers within our executive compensation peer group, but such awards are only payable if the Company meets demanding objectives. This structure currently results in total cash compensation near the median for our CEO compared to the chief executives of companies in our executive compensation peer group and total cash compensation above the median for our other NEOs compared to similar executives of companies in our executive compensation peer group.
As in past years, each NEO has a 2019 target annual cash incentive award of 150% of base salary. The target award of 150% will be earned if 2019 pretax income margin is 5.75%, which would place the Company in approximately the 50th percentile of pretax income margin performance in its executive compensation peer group. No payment will be made if pretax income margin is less than 3%, which would place the Company in the 35th percentile) of pretax income margin performance in its executive compensation peer group. The maximum award of 300% will be earned if pretax income margin equals or exceeds 8.5%, which would place the Company in the 65th percentile of pretax income margin performance in its executive compensation peer group, which has not been achieved since 2008. In the five-year period from January 1, 2014 through December 31, 2018, the Company achieved pretax income margin less than the threshold zero times, equal to or above the