Bed, Bath and Beyond 2014 Annual Report Download - page 55

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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The following is a discussion and analysis of our compensation programs as they apply to the Company’s principal executive
officer, the principal financial officer, and the five most highly compensated executive officers of the Company (other than its
principal executive officer and principal financial officer) for fiscal 2014 (‘‘named executive officers’’) whose compensation
information is presented in the Summary Compensation Table and other tables following this discussion and analysis.
Compensation Committee Objectives
Our compensation programs are determined by the Compensation Committee of the Board of Directors. The Compensation
Committee’s principal objective is to develop and implement compensation policies that align the compensation of our
executives with the Company’s performance and enhance shareholder value, while at the same time retaining an executive
team that drives the success of the Company. The Company believes that a key factor in its success to date has been the
stability of its executive team. To that end, the Company’s policy is to seek, whenever possible, at all levels, to promote from
within and to compensate executives in a manner designed to promote the long-term success of the organization. This policy
has enabled the Company to develop an executive team with deep knowledge of the Company and the retail industry.
The Company’s compensation programs do not include annual cash bonuses and allocate the majority of each executive’s
compensation to long-term performance-based equity (consisting of performance stock units and stock options, which are
dependent on the Company’s performance and/or an increase in shareholder value). The Compensation Committee believes
that the goal of these programs aligns compensation with the Company’s and shareholders’ goal of incenting management to
continue to enhance shareholder value.
Changes in Executive Compensation Program for 2014
In preparation for determining the 2014 compensation programs for the named executive officers, members of the
Compensation Committee and members of the Nominating and Corporate Governance Committee, together with members of
management, discussed various compensation and governance matters with the Company’s shareholders over the course of
the year following the Company’s 2013 Annual Meeting of Shareholders. The Company engaged in this shareholder outreach
program to exchange commentary and ideas on the Company’s compensation program and to receive feedback that would be
considered when making future compensation and governance decisions. This engagement group contacted holders of
approximately 56% of the Company’s outstanding shares and Compensation Committee members, together with members of
management, met or spoke with holders of approximately 34% of outstanding shares. During this outreach, management
spoke with shareholders representing approximately 18% of outstanding shares who indicated no current interest in
engagement, and approximately 4% of outstanding shares did not respond.
Following this outreach program and discussions with the full Board of Directors, the Company significantly redesigned its
2014 equity incentive program for the named executive officers, with a view toward further strengthening the direct link
between pay and performance and providing performance metrics that are fundamental to the business and aligning with
shareholder value creation.
In creating the new compensation structure, the Compensation Committee also considered the Company’s strategy, which
includes a focus on current performance while at the same time making long-term investments to capitalize on opportunities
presented by the rapidly changing retail landscape, such as those related to advancements in technology.
Consequently, the Compensation Committee determined to significantly revise its compensation program. The features of the
program for fiscal 2014 include the following:
— A revised performance-based equity plan with the following components:
• One-year performance test based upon Earnings Before Interest and Taxes (EBIT) margin relative to a retail industry
peer group, which awards vest in three equal annual installments from date of grant. The Compensation Committee
believed it appropriate to set a target based upon EBIT margin when compared to a retail industry peer group, to
incentivize continued operational and fiscal discipline as management executes against the Company’s strategic goals.
• Three-year performance test based upon Return on Invested Capital (ROIC) relative to a retail industry peer group,
which awards vest four years after grant. The Compensation Committee believed that, as a relative measure compared
to a retail industry peer group, ROIC over a three-year period provides a suitable metric to measure how the Company’s
investments are returning value to the enterprise.
BED BATH & BEYOND PROXY STATEMENT
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