Pottery Barn 2007 Annual Report Download - page 131

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The Compensation Committee met on March 11, 2008. During that meeting, the Compensation Committee met
in executive session to discuss Mr. Lester’s performance for fiscal 2007. Mr. Lester’s performance was assessed
against objectives delivered to the Board of Directors at the beginning of fiscal 2007. After discussion and a
review of Mr. Lester’s total compensation and that of other CEOs in our proxy peer group, the Compensation
Committee determined that Mr. Lester’s base salary was approximately at the median base salary level for the
proxy peer group. Although the Compensation Committee is satisfied with Mr. Lester’s performance, the
company’s overall results have not met expectations, and the Compensation Committee did not make any
adjustments to Mr. Lester’s base salary for fiscal 2008. Additionally, at the April 11, 2008 Compensation
Committee meeting, the Compensation Committee reviewed Mr. Lester’s long-term incentive compensation and
granted Mr. Lester restricted stock units as described above. The long-term incentive component of Mr. Lester’s
compensation is below the median for the CEOs in the comparable companies; Mr. Lester is a significant
shareholder of the company.
At that same meeting, the Compensation Committee certified that the Company Objective was achieved for fiscal
2007. However, the company’s performance results did not fully meet either the company’s or the Compensation
Committee’s expectations and, therefore, the Compensation Committee exercised negative discretion and
approved a reduced award for the Chief Executive Officer under the 2001 Incentive Bonus Plan in the amount of
$250,000. However, the Chief Executive Officer requested that the Compensation Committee withdraw his
award, and the Compensation Committee accepted his request.
Are there any other benefits considerations?
The company believes that benefits should provide our employees with protection and security through health
and welfare, retirement, disability insurance and life insurance programs. The named executive officers do not, in
general, receive benefits in excess of those provided to other employees. However, the Compensation Committee
may recommend additional benefits for certain individuals from time to time if the Compensation Committee
determines that the category and amount of such benefits are reasonable and necessary to provide additional
incentives to attract or retain key executives.
Do the executive officers have change of control arrangements?
The named executive officers who received restricted stock unit grants in fiscal 2005, Ms. Alber, Ms. McCollam,
Mr. DeMattei and Mr. Miller, will receive accelerated vesting of such awards in the event of a change of control.
In addition, Mr. Lester will receive accelerated vesting of the SSAR grant of 400,000 shares as described on page
31. Ms. Alber and Ms. McCollam are provided with certain change of control arrangements as described starting
on page 29. The Compensation Committee believes these arrangements are necessary to ensure that our named
executive officers are focused on the company’s goals and objectives, as well as the best interests of
shareholders, rather than potential personal economic exposure under these particular circumstances.
Additionally, the Compensation Committee believes that these agreements will provide a smooth transition
should the company undergo such an event. Otherwise, the executive officers do not have arrangements that
provide them with specific benefits upon or following a change of control. The company has determined that
other arrangements are not necessary to secure the company’s future should a change in control occur. In
addition, none of the executive officers is guaranteed any type of golden parachute excise tax gross-up. Our
equity compensation plans do not otherwise provide for automatic vesting acceleration upon or following a
change of control. We have considered the total potential cost of the change of control protection afforded to our
executive officers and have determined that it is reasonable and not excessive given the importance of the
objectives described above.
Do our executive officers have severance protection?
As noted in the section titled “Employment Contracts and Termination of Employment and Change-of-Control
Arrangements” on page 29, if either Laura J. Alber, President, or Sharon L. McCollam, Executive Vice President,
Chief Operating and Chief Financial Officer, is terminated without cause or voluntarily terminates her
41
Proxy