Big Lots 2007 Annual Report Download - page 30

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As evidenced by the fact that 78.2% and 67.2% of the total compensation earned by the named executive
officers in fiscal 2007 and fiscal 2006, respectively, was derived from bonuses, stock options and
restricted stock, we believe the compensation program for our executives is closely aligned with the
interests of our shareholders. Additionally, as an executive’s level of responsibility increases, so too
does the percentage of his or her total compensation that is at risk through these forms of incentive
compensation. Relative to the executive’s total compensation in fiscal 2007, Mr. Fishman’s percentage
at risk was 86.6%, while the average of the other named executives officers was 67.1%. In fiscal 2006,
Mr. Fishman’s percentage at risk was 75.6%, while the average of the other named executives officers
was 59.3%. See the Summary Compensation Table following this CD&A for the amounts earned by the
named executive officers in fiscal 2007 and fiscal 2006.
• Manage executive compensation costs.
As we discuss in greater detail in the “Comparative Compensation Data” section of this CD&A, we
compare the compensation paid to our executives with the compensation paid to similarly-situated
executives at companies within our peer group. While this comparison is not a determinative factor
for setting compensation for our executives, we believe our review of the peer group data supports
our belief that we do not overpay our executives and we are effective at managing our executive
compensation costs.
• Focus on corporate governance.
Although the compensation committee at some companies makes all compensation decisions with
respect to their executives, we believe it is consistent with best practices in corporate governance to
reach a consensus among all outside directors when setting executive compensation each year. While
the Committee takes the lead in formulating executive compensation, we believe seeking the approval
of our five additional outside directors before finalizing annual executive compensation provides an
additional check on the appropriateness of the amounts awarded.
Elements of In-Service Executive Compensation
The primary compensation components for the named executive officers during their respective terms of
employment consist of salary, bonus opportunities under the 2006 Bonus Plan, and equity awards made under
the 2005 Incentive Plan. In addition, the named executive officers are entitled to certain personal benefits and
perquisites. We believe each of these elements and the mix of elements is necessary to provide a competitive
executive compensation program, and is consistent with our compensation philosophy and furthers our
compensation objectives.
The Committee reviews each element at least annually. Individual and corporate performance directly impacts
the elements and amount of compensation paid to our named executive officers. For instance, a named executive
officer’s failure to meet individual goals may lead to a reduction in his or her compensation, a failure to receive
equity awards, or the termination of his or her employment. Conversely, excellent corporate performance may lead
to greater bonus payouts and, possibly, to the achievement of financial goals that accelerate restricted stock vesting.
The Committee and the other outside directors also have discretion, subject to the limitations contained in our
bonus and equity plans and the executives’ employment agreements, in setting named executive officers’ salary,
bonus opportunities and equity awards.
• Salary
Salary is cash compensation and is established annually for each named executive officer. A minimum
salary for each named executive officer is set forth in his or her respective employment agreement, as
described below.
• Bonus
Each named executive officer has the opportunity to earn an annual cash bonus under the 2006 Bonus
Plan. Bonus payouts correspond to a percentage of each named executive officer’s salary (“payout
percentage”) and are based on whether we achieve certain corporate performance amounts under one or
more financial measures. The corporate performance amounts and financial measures are set annually