Extreme bonuses tied to employee retention

Having struggled to build an effective sales force for much of this year, equipment vendor Extreme Networks has tied the annual bonuses of its top executives in part to how well the company retains its employees.

Under the company’s 2007 executive compensation plan approved by the board of directors Nov. 15, 20% of the bonuses of Extreme’s top four executives is based on “the amount of undesirable attrition of the company’s employees” during the fiscal year, regulatory filings said. Forty percent is based on a revenue formula, and the remaining 40% is based on operating profit as a percentage of revenue.

That plan applies to Extreme’s new Chief Executive Officer Mark Canepa (hired in August), vice president and acting Chief Financial Officer Michael Palu, Chief Operating Officer Alexander Gray and vice president of research and development Herb Schneider.

Frank Carlucci, Extreme’s senior vice president of worldwide sales, has a similar plan, though 50% of his bonus is based on retention of sales personnel in particular rather than overall employees. His target bonus for fiscal 2007 is $50,000.

Fifteen percent of the bonuses of all other vice presidents is based on employee attrition.

Canepa’s 2007 base salary is $480,000, and his target bonus for fiscal 2007 is 70% of that, or $336,000. The amount tied to employee attrition is $67,200.

Extreme announced having boosted its total headcount by nine to 856 in the quarter that ended October 1. But recent additions to the U.S. sales force have not yet risen to “full productivity,” the company said last month, adding that it is training its sales force to focus on selling solutions rather than just products.

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