Bed, Bath and Beyond 2010 Annual Report Download - page 47

BED BATH & BEYOND PROXY STATEMENT
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In making its determinations for fiscal 2010, the Compensation Committee engaged JFR to conduct a compensation review
for all executive officers, including the named executive officers and for certain other executives. Under the direction of the
Compensation Committee, JFR performed a compensation study that relied on the compensation analysis conducted in 2009, and
included additional market data from surveys and proxies. Their approach involved determining the median and 75th percentile
market compensation by position. JFR advised that in all cases the increased total direct (cash and non-cash) compensation for the
named executive officers was below the 75th percentile of the peer group in calculations that also compared total compensation
against such group’s latest reported fiscal year compensation. Since the compensation for all of the Company’s named executive
officers for fiscal 2009 remained the same as the compensation for those executives for fiscal 2008 and since the Company
achieved strong financial results in fiscal 2009, the Compensation Committee determined, early in fiscal 2010, that all of the
executive officers of the Company, other than the Co-Chairmen, should receive increases in base salaries effective in May 2010.
Elements of Compensation
The Company seeks to provide total compensation packages to its associates, including its named executive officers, which
implement its compensation philosophy. The components of the Company’s compensation programs are base salary, equity
compensation (consisting of stock options and restricted stock awards), retirement and other benefits (consisting of health
plans, a limited 401(k) plan match and a nonqualified deferred compensation plan) and perquisites. The Company places
greater emphasis in the compensation packages for named executive officers on equity incentive compensation rather than cash
compensation in order to align compensation more closely with performance results and the creation of shareholder value.
The Company does not have a cash bonus program for executive officers.
Base Salary
The Company pays base salaries to provide our named executive officers with current, regular compensation that is appropriate
for their position, experience and responsibilities. Changes in base salary, if any, are effective in May of each fiscal year. The
Company believes that cash compensation levels for our named executive officers are within or below market range as the
Company places greater emphasis on equity compensation.
Equity Compensation
The Company’s overall approach to equity compensation is to make equity awards comprised of a combination of stock options
and restricted stock to all executive officers, including the named executive officers, and a small number of other executives.
These grants are made on May 10 of each year (or the following trading day should such date fall on a weekend or holiday).
The vesting provisions relating to equity compensation have been and continue to be determined with the principal purpose of
retaining the Company’s executives and key associates. The Company believes its equity compensation policies have been highly
successful in the long term retention of its executives and key associates, including its named executive officers.
Consistent with the Company’s historic practice, the stock options vest over time, subject, in general, to the named executive
officers remaining in the Company’s employ on specified vesting dates. Vesting of the restricted stock awarded to these named
executive officers is dependent on (i) the Company’s achievement of a performance-based test for the fiscal year in which the
grant is made, and (ii) assuming achievement of the performance-based test, time vesting, subject, in general, to the executive
remaining in the Company’s employ on the specified vesting dates.
The performance-based test requires that the Company’s net income in the fiscal year exceed the Company’s net income in the
prior fiscal year or that the Company’s net income as a percentage of sales place it in the top half of the companies in the S&P
500 Retailing Index with respect to such measurement. Net income is adjusted for such purpose to reflect (i) mergers, acquisitions,
consolidations or dispositions, (ii) changes in accounting methods, and (iii) extraordinary items, as defined in Accounting
Standards Codification Topic No. 225, “Income Statement”, or stock repurchase or dividend activity. The Company believes that
this performance-based test meets the standard for performance-based compensation under Section 162(m) (“Section 162(m)”) of
the Internal Revenue Code of 1986, as amended (the “Code”), so that the restricted stock awards will be deductible compensation
for certain executives if their annual compensation exceeds $1 million. The Compensation Committee believes that this test is an
appropriate measure of performance for companies in the retail industry and, specifically, for companies in the Company’s sector.
In addition, even if the performance-based test is met, the executive must remain in the Company’s employ for an extended