Pottery Barn 2009 Annual Report Download - page 139

• Compensation recommendations as to senior executive officers (other than the Chief Executive Officer).
At certain of these meetings, the Chief Executive Officer made recommendations with respect to the
compensation arrangements for other executives and with respect to the structure and terms of those officers’
target bonuses and equity-based compensation. However, the Chief Executive Officer did not participate in the
portions of the meetings during which his own compensation was considered and established.
Does the Compensation Committee have outside advisors?
The Compensation Committee charter grants the Compensation Committee the sole authority to hire outside
advisors and compensation consultants. Although the company pays their fees, these advisors report directly to
the Compensation Committee. Frederic W. Cook & Co., Inc., or Cook & Co., has been engaged as the
independent executive compensation consulting firm to assist the Compensation Committee in discharging its
responsibilities from time to time. During fiscal 2009, Cook & Co. provided the Compensation Committee with
peer group proxy and other publicly disclosed data related to named executive officers and director
compensation. Cook & Co. also provided certain services on behalf of the Compensation Committee primarily
related to compiling market data and advice regarding general compensation trends in the retail industry and
among similarly situated companies. The Compensation Committee may request that Cook & Co. attend its
meetings and advise the Compensation Committee either in person or via telephone. Cook & Co. provided
counsel to the Board at the January 25, 2010 Board meeting, at the request of the Board.
In fiscal 2009, Cook & Co. did not provide services to the company relating to non-executive compensation.
What is the Compensation Committee’s philosophy of executive compensation?
The Compensation Committee believes that the company’s executive compensation programs should support the
company’s objective of creating value for its shareholders. Accordingly, the Compensation Committee believes
that executive officers and other key employees should have a significant interest in the company’s stock
performance, and compensation programs should link executive compensation to shareholder value. For this
reason, the Compensation Committee strives 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 that the Compensation Committee has sought to accomplish these goals 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. The Compensation Committee believes
that strong financial performance, on a sustained basis, is an effective means of enhancing long-term shareholder
return. There is no pre-established policy or target for the allocation between cash and non-cash compensation
and short-term and long-term compensation. Rather, the appropriate level and mix of compensation to meet these
philosophical goals is reviewed and determined on an ongoing basis, and at least annually.
How is the Compensation Committee currently implementing this philosophy given recent conditions in the retail
industry?
The Compensation Committee remains committed to its pay-for-performance philosophy and for that reason, a
significant portion of executive compensation is tied directly to our company’s financial and operating
performance.
The Compensation Committee set performance goals at the beginning of fiscal 2009 and believed that these
goals, as applicable to named executive officers’ compensation, were achievable with significant effort even
given the volatile economic conditions impacting the retailing industry.
At the February 12, 2010 Compensation Committee meeting, the Compensation Committee began a review of
the base salaries and bonus targets for its named executive officers. At the March 23, 2010 Compensation
45
Proxy