Pottery Barn 2005 Annual Report Download - page 112

What is the role of the Compensation Committee with respect to executive compensation?
The Compensation Committee administers the company’s compensation programs, including compensation
arrangements and equity plans. We have engaged an independent executive compensation consulting firm to
assist us in discharging our responsibilities. Our role is detailed in the Compensation Committee Charter, which
was amended and restated by the Board on March 15, 2006. The Compensation Committee Charter is available
on the company’s website at www.williams-sonomainc.com and is attached to this Proxy Statement as Exhibit B.
Specifically, we:
• Review and approve corporate goals and objectives relevant to the compensation of the Chief Executive
Officer, evaluate the Chief Executive Officer’s performance in light of those goals and objectives, and
review and approve the level of compensation, including base salary, bonus, equity compensation, and
any other benefits or perquisites to be provided to the Chief Executive Officer based on this evaluation;
• Review, make recommendations to the Board regarding, and approve, as appropriate, compensation for
executive officers other than the Chief Executive Officer. Each of the named executive officers is listed in
the Summary Compensation Table appearing in this Proxy Statement;
• Review, make recommendations to the Board regarding, and approve, as appropriate, general
compensation goals and guidelines for the company’s employees;
• Review, make recommendations to the Board regarding, and approve, as appropriate, the compensation
policy for the non-employee directors of the company; and
• Administer, within the authority delegated by the Board, the company’s incentive compensation and
equity-based plans.
Does the Compensation Committee delegate any of its authority?
The Compensation Committee does not delegate any of its authority with respect to executive officers and
non-employee directors of the company. However, the Compensation Committee has appointed an Equity Award
Committee to which it has delegated the ability to grant awards under the company’s 2001 Long-Term Incentive
Plan to those employees who are not executive officers. The Equity Award Committee consists of two of the
company’s directors, Edward A. Mueller and Patrick J. Connolly.
What is the Compensation Committee’s philosophy of executive compensation?
We believe that the company’s executive compensation programs should support the company’s objective of
creating value for its shareholders. Accordingly, we believe that executive officers and other key employees
should have a significant stake in the company’s stock performance and that compensation programs should link
executive compensation to shareholder value. For this reason, we strive to ensure that the company’s executive
officer compensation programs are designed to enable the company to attract, retain, motivate and reward highly
qualified executive officers while maintaining strong and direct links between executive pay, individual
performance, the company’s financial performance and shareholder returns. One of the ways we have sought to
accomplish this is by making a significant portion of individual compensation directly dependent on the
company’s achievement of financial goals, and by providing significant rewards for exceeding those goals. We
believe that strong financial performance, on a sustained basis, is an effective means of enhancing long-term
shareholder return.
What are the components of executive compensation?
We consider three major elements in our executive compensation program:
• Base salary;
• Annual incentive opportunities; and
• Long-term incentives.
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