Pottery Barn 2009 Annual Report Download - page 145

per share of $0.19 (excluding extraordinary non-recurring charges), and at lower or higher than target levels if
funding was below or above earnings per share of $0.19 (excluding extraordinary non-recurring charges). The
Compensation Committee retains discretion regarding whether to fund the bonus pool and may increase or
decrease actual bonuses paid under the Management Bonus Plan. Based upon the company’s performance, the
Compensation Committee funded the bonus pool at the maximum level for fiscal 2009 performance and did not
use discretion to alter the bonus pool funding level.
Mr. Harvey was a named executive officer at the end of fiscal 2009. Therefore, Mr. Harvey’s performance was
assessed by the Chief Executive Officer in the same manner as the assessment for the other named executive
officers, taking into account the achievement of Mr. Harvey’s individual goals and objectives. Achievement of
objectives that increase shareholder return or that are determined by the Chief Executive Officer to significantly
impact future shareholder return are significant factors in the Chief Executive Officer’s subjective performance
assessment. The Chief Executive Officer believed that Mr. Harvey performed at a very high level, and, to reward
this achievement, recommended a bonus award commensurate with the results achieved.
The Compensation Committee believes that achieving individual goals and objectives is important to the overall
success of the company and will adjust bonuses to reflect performance in these areas. For example, if the
company or the individual fails to fully meet some or all of the company or individual objectives, the award may
be significantly reduced or even eliminated. Conversely, if the objectives are surpassed, awards under the
Management Bonus Plan may be increased or subject to less or no reduction.
In determining final bonus amounts for Mr. Harvey for fiscal 2009, the Compensation Committee verified the
company’s actual performance for fiscal 2009, reviewed management’s recommendation for the resulting
aggregate funding levels for the Management Bonus Plan and approved an aggregate award amount under the
Management Bonus Plan. The Compensation Committee also reviewed and approved the individual bonus
payable to Mr. Harvey under the Management Bonus Plan.
What is the primary performance goal for fiscal 2010?
The primary performance goal for fiscal 2010 under the Bonus Plan relates to an earnings goal. Even in difficult
and challenging economic times, the Compensation Committee believes that earnings remain a key indicator of
overall performance. The Compensation Committee also set supplemental performance goals to guide its use of
negative discretion.
What were the target bonus amounts established for fiscal 2009 and fiscal 2010?
At its March 18, 2009 meeting, the Compensation Committee established the incentive targets under the Bonus
Plan for each named executive officer for fiscal 2009, other than with respect to Mr. Harvey, who was not a
named executive officer at that time and was not eligible to participate in the Bonus Plan. The target bonuses
under the Bonus Plan were set after a review of the respective responsibilities of the named executive officers,
the bonus targets set by our comparable companies, the current combinations of pay elements for each named
executive officer and whether such combinations were appropriate to provide incentives for achievement of
desired results for the company. The target bonus for Mr. Harvey for fiscal 2009 under the Management Bonus
Plan was set by the Chief Executive Officer after a similar review of these considerations. In light of the market
data and expected continued weakness of the retail industry, the Compensation Committee (and with respect to
Mr. Harvey’s target bonus, the Chief Executive Officer) did not raise target bonuses as a percentage of base
salaries for the named executive officers over the levels that had been in effect for fiscal 2008.
The base salary, together with the target bonus (together, “target total cash compensation”), for the named
executive officers for fiscal 2009, was relatively close to the 50th percentile of target total cash compensation for
similarly situated executive officers at comparable companies. This reflects the company’s pay-for-performance
philosophy and its belief that total target cash compensation remain around the 50th percentile for similarly
situated executive officers at comparable companies.
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