Pottery Barn 2009 Annual Report Download - page 148

In determining the type and number of equity awards granted to an individual executive, the Compensation
Committee considered such factors as:
• The individual’s performance and contribution to the profitability of the company;
• The type and number of awards previously granted to an individual;
• An individual’s outstanding awards;
• The vesting schedule of the individual’s outstanding awards;
• The relative value of awards offered by comparable companies to executives in comparable positions to
fairly benchmark awards of different sizes and equity instruments;
• Internal equitability between positions within the company; and
• Additional factors, including succession planning and retention of the company’s high-level potential
executives.
The Compensation Committee believes that each of these factors influences the type and number of shares
appropriate for each individual and that no one factor is determinative.
In determining whether to make restricted stock unit and stock-settled stock appreciation right grants for named
executive officers, the Compensation Committee took into account the Chief Executive Officer’s assessment of
the performance of the company and the adequacy of compensation levels of named executive officers.
What equity grants were made in fiscal 2009?
As the result of the above-described recommendation, no restricted stock units or stock-settled stock appreciation
rights were granted to named executive officers in fiscal 2009, except as described below.
On January 25, 2010, the Compensation Committee approved an award to Mr. Lester of 249,501 restricted stock
units as shown in the “Grants of Plan-Based Awards” table on page 36 and the tables below. The award will vest
upon his retirement from the company, which is defined as his leaving the company’s employment at age 70 or
later, with at least ten years of service. Mr. Lester, who has been with the company for more than 30 years, is
expected to retire in May 26, 2010, the date of the Annual Meeting. The Compensation Committee determined
that this award of restricted stock units is appropriate given the company’s fiscal 2009 performance (including
three consecutive quarters of better than expected results, a $206 million increase in the company’s cash balance
versus last year, and a marked increase in fiscal 2009 holiday revenues).
In approving this grant, the Compensation Committee also considered the amounts and terms of equity grants
that it expected it would make to other named executive officers early in fiscal 2010 and advice from Cook & Co.
The Compensation Committee determined that it was best to make the grant to Mr. Lester earlier than the other
executive grants in order to complete all expected actions with respect to Mr. Lester’s compensation and
anticipated departure prior to approving the Consulting Agreement (other than his cash performance bonus for
fiscal 2009, which was not finalized until final financial results were confirmed).
What equity grants have been made in fiscal 2010?
At its March 2010 meeting, the Compensation Committee approved equity grants to the named executive officers
consisting of restricted stock units and stock-settled stock appreciation rights. In determining the number and
type of equity grants to be made to the named executive officers, the Compensation Committee considered both
the retention value of granting restricted stock units that provide named executive officers with immediate value
because they have no purchase price (but are subject to vesting) and the benefits to our shareholders of granting
stock-settled stock appreciation rights with value that is tied to sustained long-term stock price performance. The
Compensation Committee continued to target a range between the 50th and 75th percentile of our comparable
companies and relied on other factors as discussed above when determining the size of the equity grants. In
54