Pottery Barn 2008 Annual Report Download - page 137

What were the material changes made to the RSUs awarded in 2008?
The Compensation Committee conditioned the restricted stock unit awards made on May 2, 2008 upon the
achievement of $1.25 in earnings per share for fiscal 2008. In October 2008, a determination was made that the
established performance-based vesting criterion could not be achieved given the continued deterioration of
industry conditions. As a result, the company was required to reverse the financial accounting expense it had
recognized on these RSUs to date.
As discussed above, at its October 28, 2008 meeting, the Compensation Committee determined that it was
critical to retain the services of these strong executives to lead the company through a difficult period in its
history. As a result, the Compensation Committee determined that it would be in the best interest of the company
and its shareholders to eliminate the performance-based vesting criteria from the retention grants and restore the
retentive power of these awards.
Does the company have a stock ownership policy for its executive officers?
We do not currently have a stock ownership policy for our executive officers. However, all of our named
executive officers own shares of the company’s common stock or vested, but unexercised, equity awards.
Does the company have a policy regarding recovery of past awards or payments in the event of a financial
restatement?
Although we do not currently have a formal policy regarding recovery of past awards or payments in the event of
a financial restatement, we support the review of performance-based compensation following a restatement that
impacts the achievement of performance targets relating to that compensation, followed by appropriate action.
These actions may include recoupment of cash or other incentives, as well as employment actions including
termination.
How is the Chief Executive Officer compensated?
W. Howard Lester became Chief Executive Officer as of July 14, 2006. Mr. Lester’s fiscal 2008 compensation
package was based on:
• A review of the compensation paid to chief executive officers of comparable companies (based on the
process described above);
• Company performance; and
• Our general compensation philosophy as described above.
The Compensation Committee reviewed Mr. Lester’s fiscal 2008 base salary at its meeting in March 2008.
Although the Compensation Committee is satisfied with Mr. Lester’s performance, the company’s overall results
have not met expectations. After a discussion and a review of Mr. Lester’s total compensation and that of other
Chief Executive Officers 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 and made no adjustment
to Mr. Lester’s base salary for fiscal 2008.
At the April 2008 Compensation Committee meeting, the Compensation Committee reviewed Mr. Lester’s long-
term incentive compensation and granted Mr. Lester and the other named executive officers the restricted stock
units described above. The long-term incentive component of Mr. Lester’s compensation is below the median for
Chief Executive Officers in the comparable companies. The Compensation Committee believed that a grant
below the median levels was sufficient to meet the company’s compensation goals.
On November 7, 2008, the Compensation Committee granted special SSARs to all the named executive officers
as described on page 37. The Compensation Committee determined that retaining the services of Mr. Lester was
a priority for the company and therefore granted Mr. Lester SSARs covering 425,000 shares at the time
additional SSARs were granted to the other named executive officers.
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