Pottery Barn 2009 Annual Report Download - page 142

How are base salaries determined?
Base salaries are paid to provide executives and other employees with a minimum fixed level of cash
compensation each year. The Compensation Committee believes that executive officers’ base salaries must be
sufficiently competitive to attract and retain key executives, and believes targeting base salaries at or near the
median among the proxy peer group is generally appropriate to meet these objectives. Accordingly, base pay and
annual increases are determined by analyzing each individual’s salary and total target compensation relative to
total salary and target compensation for similar positions at comparable companies and through a subjective
recommendation made by the Chief Executive Officer based on each executive’s experience and past and
anticipated contributions to the company’s success. In determining executive base salaries, the Compensation
Committee also considers overall company performance and performance relative to peer companies generally
and the home furnishings industry specifically.
The Compensation Committee reviews the base salaries of its named executive officers against, and sets the base
salaries of its named executive officers relative to, the salaries of the executives in its proxy peer group. For
fiscal 2009, this review occurred in March 2009. No changes were made at that time. The Compensation
Committee did not increase base salaries for fiscal 2009 because it determined that the named executive officers’
base salary levels were appropriate given both current market conditions and the company’s overall financial
position. Mr. Harvey was not a named executive officer at the time this review occurred in March 2009. His base
salary also did not increase for fiscal 2009, and was set by the Chief Executive Officer based on the same criteria
applicable to the other named executive officers.
At the February 12, 2010 meeting, the Compensation Committee began a review of the base salaries of its named
executive officers and considered increases to the base salaries in the amounts and for the reasons discussed
below.
At the beginning of fiscal 2010, the Chief Executive Officer reviewed the performance of the named executive
officers, assessing individual and business unit performance against the expectations set at the beginning of fiscal
2009. The Chief Executive Officer also reviewed proxy peer group data provided by Cook & Co. on behalf of the
Compensation Committee and additional market survey data provided to management by the Hay Group, Hewitt
Consultants and Towers Perrin, which was reviewed on behalf of the Compensation Committee by Cook & Co.
At the time, fiscal 2009 peer group data had not yet been reported so the review was based on fiscal 2008
information. The Chief Executive Officer believed that the named executive officers were performing very well,
and that the company’s positive results were directly related to the efforts of his executive team. He believed that
their adherence to and execution of the strategic initiatives set out in fiscal 2009 led to the company’s ability to
gain market share and increased earnings over initial estimates for each quarter.
After a review of the base salaries of the named executive officers relative to proxy peer group and market
survey data, the Chief Executive Officer proposed changes to the base salaries of all of the named executive
officers, along with increases to their respective bonus targets. The Chief Executive Officer proposed these
changes so that the base salaries and bonus targets of the named executive officers would bring the executives to
at or above the 50th percentile for target total cash compensation compared to the company’s proxy peer group.
These changes were informed by the impending changes to the executive management team, including
Ms. Alber’s anticipated appointment as the company’s Chief Executive Officer (discussed below).
Following the Chief Executive Officer’s recommendations, the Compensation Committee approved the
following changes to the base salaries of the named executive officers (other than the Chief Executive Officer)
for fiscal 2010 at the Compensation Committee meeting held on March 23, 2010:
Named Executive Officer Fiscal 2009 Base Salary Fiscal 2010 Base Salary
Laura J. Alber ......... $800,000 $975,000
Sharon L. McCollam .... $725,000 $850,000
Patrick J. Connolly ..... $570,000 $581,400
Richard Harvey ........ $525,000 $600,000
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