Big Lots 2011 Annual Report Download - page 42

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attract a particular candidate who we believe is well-suited for our business). We believe the amounts
and elements of compensation that we offer make us competitive within our peer groups, and that
offering competitive packages has enabled us in recent years to attract and retain quality executives.
We believe failing to offer competitive amounts and elements of compensation to candidates and our
executives would impair our ability to attract and retain a high level of executive talent.
Each of the elements of compensation we provide serves a different role in attracting and retaining
executives. Salary serves as a short-term retention tool. Bonus under the 2006 Bonus Plan is based on
annual corporate financial performance and is designed primarily to retain executives on a year-to-year
basis. Stock options issued under the 2005 LTIP vest over four years in equal annual increments and
provide executives with an incentive to remain with us for up to the seven-year term of the stock option.
Restricted stock awarded to most executives under the 2005 LTIP encourages executives to remain with
us for up to five years after the award date, as the restricted stock generally vests only if (1) we meet
a threshold corporate financial goal (“first trigger”) and (2) either we meet another more challenging
corporate financial goal (“second trigger”) or the five-year period following the grant date lapses. As
discussed in more detail in the “Retention Agreement” section of this CD&A, the restricted stock we
awarded to Mr. Fishman in fiscal 2011 pursuant to his retention agreement is designed to assure us
that we will have his continued services through March 2013. We believe that the perceived value to
the executives of the personal benefits and perquisites we offer to them and the convenience of having
these benefits when faced with the demands of their positions makes them a meaningful element of our
compensation program.
• Motivate executives to contribute to our success and reward them for their performance.
We use the bonus and equity elements of our executive compensation program as the primary tools to
motivate our executives to continually improve our business in order to promote sustainable profitability
and enhanced shareholder value. These compensation elements provide executives with meaningful
incentives to meet or exceed the corporate financial goals set by our Board each year.
For an executive to earn a bonus under the 2006 Bonus Plan, we must achieve a minimum corporate
performance amount established by the Committee at a time when achievement of that amount is
substantially uncertain. Although bonuses will be paid to executives under the 2006 Bonus Plan for
fiscal years in which we achieve minimum or target corporate performance amounts, our executives
also have an opportunity to earn up to double the amount of their target bonus compensation if we
exceed the target corporate performance amount. Conversely, if we do not meet the minimum corporate
performance amount, executives do not receive a bonus under the 2006 Bonus Plan. We believe this
structure is essential to motivate executives to not only meet the goals we set, but also to surpass
those goals.
Restricted stock granted to executives under the 2005 LTIP is a full value award. Accordingly, we
believe it is appropriate for us to require the achievement of a predetermined threshold corporate
financial goal (i.e., the first trigger) before restricted stock issued under the 2005 LTIP may vest.
We believe imposing a performance requirement in the form of a corporate financial goal, which
is established by the Committee at a time when achievement of the goal is substantially uncertain,
encourages positive performance and protects our shareholders from dilution in the absence of our
performance. As discussed above, restricted stock awarded to our executives (other than to Mr. Fishman
pursuant to his retention agreement) vests on an accelerated basis if we achieve the second trigger. The
second trigger is established when the award is made, and is typically based on a projected multi-year
corporate operating plan. The restricted stock awarded to Mr. Fishman pursuant to his retention
agreement also requires that we achieve a corporate financial goal; however, if that goal is not achieved
for the year in which it was established, there is no opportunity for that award to vest based on our
performance in subsequent years.