Pottery Barn 2006 Annual Report Download - page 123

$2,500. Some of these perquisites are also provided to other employees. In addition, Mr. Lester occasionally makes
personal use of the company aircraft. The value of all of these benefits to each of the named executive officers is
detailed in the “Other Annual Compensation from Summary Compensation Table” on page 14.
How does the Compensation Committee address Internal Revenue Code Section 162(m)?
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, and regulations adopted under it by
the Internal Revenue Service, publicly held companies may be precluded from deducting certain compensation
paid to certain executive officers in excess of $1,000,000 in a year. The regulations exclude from this limit
performance-based compensation and stock options, provided certain requirements, such as shareholder
approval, are satisfied. Exceptions to this deductibility limit may be made for various forms of “performance-
based” compensation. The company believes that awards granted under the company’s equity incentive plans can
be excluded from the $1,000,000 limit. We believe that bonuses awarded under the 2001 Incentive Bonus Plan
are excluded from calculating the limit. While we cannot predict how the deductibility limit may impact the
company’s compensation program in future years, we intend to maintain an approach to executive compensation
that strongly links pay to performance.
COMMITTEE REPORTS
The following reports by our Compensation Committee, Nominations and Corporate Governance Committee and
Audit and Finance Committee covering fiscal 2006 shall not be deemed to be (i) “soliciting material,” (ii) “filed”
with the SEC, (iii) subject to Regulations 14A or 14C of the Securities Exchange Act of 1934, as amended, or
(iv) subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. The reports shall
not be deemed incorporated by reference into any of our other filings under the Securities Exchange Act of 1934,
as amended, or the Securities Act of 1933, as amended, except to the extent we specifically incorporate them by
reference into such filing.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis
with management. Based on our review and discussion with management, we have recommended to the Board of
Directors that the Compensation Discussion and Analysis be included in this proxy statement and in the
Company’s Annual Report on Form 10-K for fiscal 2006.
Nominations and Corporate Governance Committee Report
Who serves on the Nominations and Corporate Governance Committee?
The Nominations and Corporate Governance Committee consisted of Michael R. Lynch, Sanjiv Ahuja,
Adrian D.P. Bellamy and David B. Zenoff during fiscal 2006. Mr. Lynch serves as Chairman of the Nominations
and Corporate Governance Committee. The Board has determined that each current member of the Nominations
and Corporate Governance Committee is independent under the NYSE rules, as currently in effect. Each current
member of the Nominations and Corporate Governance Committee is a non-employee director.
What is the role of the Nominations and Corporate Governance Committee?
Our role is detailed in the Nominations and Corporate Governance Committee Charter, which was amended and
restated by the Board on March 15, 2006. The Nominations and Corporate Governance Committee Charter is
available on the company’s website at www.williams-sonomainc.com and is attached to this Proxy Statement as
Exhibit B. The Nominations and Corporate Governance Committee Charter is also available in print to any
shareholder who requests it. Specifically, we:
• Periodically review and recommend to the Board suitable revisions to the corporate governance
guidelines applicable to the company and the categorical standards of independence applicable to the
company’s outside directors;
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