Pottery Barn 2009 Annual Report Download - page 147

In making its decision regarding bonuses, the Compensation Committee evaluated company performance and the
individual performance of the named executive officers. The Chief Executive Officer made recommendations to
the Compensation Committee based on his subjective assessment of each executive’s performance relative to
their roles and areas of responsibility. The Compensation Committee discussed the Chief Executive Officer’s
recommendations at the meeting and concurred that the results for fiscal 2009 were significantly better than
expected. The Compensation Committee used its negative discretion to award bonuses under the Bonus Plan that
were less than the maximum potential payout and awarded the named executive officers bonuses as described
below. The Compensation Committee also used its discretion under the Management Bonus Plan to award
Mr. Harvey a bonus greater than his allocation of the funded bonus pool. This increased bonus for Mr. Harvey
was awarded as a result of Mr. Harvey’s efforts and leadership that helped lead to the company’s positive results
for fiscal 2009. The actual fiscal 2009 bonus amounts awarded to the named executive officers were:
Named Executive Officer
Fiscal 2009
Bonus
Amount
Fiscal 2009
Bonus
(as a Percentage
of Base Salary)
W. Howard Lester ................. $2,000,000 205%
Sharon McCollam ................. $1,500,000 207%
Laura J. Alber ..................... $1,500,000 188%
Patrick J. Connolly ................. $ 500,000 88%
Richard Harvey ................... $ 600,000 114%
The Compensation Committee determined that the bonus amounts were appropriate given their strong
performance and also given that the named executive officers received no long-term incentive compensation in
fiscal 2009 (with the exception of the exchanged awards for Mr. Harvey and the January 2010 award to
Mr. Lester, each as described below) resulting in total direct compensation below the 50th percentile for fiscal
2009 for the named executive officers other than Mr. Lester. See the section below titled “How is the Chief
Executive Officer compensated?” for further discussion of Mr. Lester’s compensation for fiscal 2009.
How is long-term incentive compensation determined in general?
The third primary component of the company’s executive compensation program consists of long-term equity
compensation awards. The Compensation Committee continues to believe that equity compensation awards are
important for motivating executive officers and other employees to increase shareholder value over the long
term.
The equity awards granted to named executive officers are designed to be competitive with those offered by
comparable companies for each named executive officer’s job level, e.g., between the 50th and 75th percentile of
our comparable companies, to reflect the Chief Executive Officer and Compensation Committee’s assessment of
such executive’s on-going contributions to the company, to create an incentive for such executives to remain
with the company, and to provide a long-term incentive to help the company achieve its financial and strategic
objectives.
Historically, the Compensation Committee has granted restricted stock units and stock-settled stock appreciation
rights to its named executive officers. The Compensation Committee believes restricted stock units are effective
for retention and also result in less dilution than options and stock-settled stock appreciation rights. At the same
time, the Compensation Committee believes that stock-settled stock appreciation rights provide valuable
incentives to increase shareholder value.
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