Bed, Bath and Beyond 2014 Annual Report Download - page 56

— Awards of stock options, which are intended to be valued at no more than one-third of total performance-based equity,
and vest over a five-year period (three years for the Co-Chairmen). The Compensation Committee believed stock options
provide further incentives aligned with the long-term interests of shareholders.
— Awards of performance-based equity (in the form of performance stock units and stock options) which represents 79% of
the Chief Executive Officer’s cash and equity compensation for 2014, and the majority of cash and equity compensation
for the other named executive officers.
— No increase in base salary for the Company’s Chief Executive Officer or Co-Chairmen. The Company also maintained its
practice of not awarding cash bonuses.
In addition, the Board of Directors adopted the following:
— Stock ownership guidelines that require the Company’s Chief Executive Officer and each outside director to hold the
Company’s common stock with a value of at least $6,000,000 and $300,000, respectively.
— Restrictions on engaging in hedging transactions involving the Company’s common stock and on pledging such common
stock, in each case, by the Company’s directors and executive officers.
The Compensation Committee believes that a combination of a performance metric requiring fiscal discipline in the relative
short term (one-year period) with a vesting period that extends over three years, and a performance metric that measures the
return on the investments being made to address a rapidly changing industry over a three-year period with vesting following
the fourth year, together with stock options vesting over three or five years, appropriately aligns the compensation program
with both the short- and long-term interests of the Company’s shareholders.
These changes are reflective of, and responsive to, the Company’s strategy (which balances the requirements of prudent
management in the relative short term with the necessity for significant investment focused on the longer term), shareholder
input, and the Compensation Committee’s objectives.
Methodology for Determining Executive Compensation
In making its determinations with respect to executive compensation, the Compensation Committee has engaged the services
of a compensation consultant pursuant to its charter. In connection with making its determinations regarding executive
compensation for fiscal 2014 and for several prior years, the Compensation Committee retained Arthur J. Gallagher & Co.
Human Resources & Compensation Consulting Practice (‘‘Gallagher’’) or its predecessor to conduct a compensation review for
the named executive officers and certain other executives. Gallagher has not served the Company in any other capacity except
as consultants to the Compensation Committee. Both the Compensation and the Nominating and Corporate Governance
Committees also receive advice and assistance from the law firm of Chadbourne & Parke LLP, which has acted as counsel only
to the Company’s independent directors and its Board committees. The Compensation Committee has assessed the
independence of Gallagher and Chadbourne & Parke LLP pursuant to the SEC rules and concluded that no conflict of interest
exists that will prevent them from being independent advisors to the Compensation Committee.
The Compensation Committee charter, which describes the Compensation Committee’s function, responsibilities and duties, is
available on the Company’s website at www.bedbathandbeyond.com under the Investor Relations section. The Compensation
Committee consists of three members of our Board of Directors: Ms. Morrison and Messrs. Adler and Barshay, all of whom are
‘‘independent’’ as defined by the NASDAQ listing standards and the applicable tax and securities rules and regulations. The
Compensation Committee meets on a regular basis for various reasons as outlined in its charter.
Under the direction of the Compensation Committee, the compensation review included a peer group competitive market
review of executive compensation and total compensation recommendations by Gallagher. The peer group developed by
Gallagher, agreed upon by the Compensation Committee and upon which it based its recommendations for fiscal 2014
compensation, consisted of 19 retail companies of a size range based on revenue and net income relatively closely aligned
with the Company’s revenue and net income, all of them in the retail industry.
The size of the peer group was reduced from the 23 companies used in fiscal 2013. Six companies were dropped from the peer
group on the recommendation of Gallagher for either one of two reasons: negative net income and severe financial stress or
revenue that was less than half of the Company’s revenue. These companies were Barnes & Noble, Inc., J.C. Penney Company, Inc.,
DSW Inc., Pier 1 Imports, Inc., Saks Incorporated, and Williams-Sonoma, Inc. Positive net income and comparable annual revenue
are two important factors in determining the Company’s peer group. Two companies were added — Dollar General Corporation
and Staples, Inc. — as their financial and business characteristics were compatible with the peer group design.
BED BATH & BEYOND PROXY STATEMENT
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